Top-rated municipal bonds ended steady in quiet activity on Tuesday, according to traders, who returned to work after a long holiday weekend. The market closed early last Friday and remained closed on Monday for Memorial Day.
In the primary, buyers are looking ahead to a $4.57 billion calendar, which is dominated by a big competitive sale from Pennsylvania on Wednesday and two large negotiated deals from a New York issuer on Thursday.
The yield on 10-year benchmark muni general obligation on Tuesday was unchanged from 1.66% on Thursday, while the 30-year muni yield was flat at 2.45%, according to the final read of Municipal Market Data's triple-A scale.
U.S. Treasuries were little changed on Tuesday after moving lower late Friday when Federal Reserve Board Chair Janet Yellen one again spoke of increasing the fed funds rate target, and, once again, hedged about the timing.
"It's appropriate -- and I've said this in the past -- for the Fed to gradually and cautiously increase our overnight interest rate over time," Yellen said at Harvard University. "Probably in the coming months such a move would be appropriate."
Yellen speaks again next week, after this Friday's release of the May employment report.
At Harvard the Fed chief echoed the Federal Open Market Committee's statement, which said faster economic growth and continued labor market improvement would make a rate hike appropriate.
In late trading on Tuesday, the yield on the two-year Treasury slipped to 0.87% from 0.88% on Friday, while the 10-year Treasury yield gained to 1.84% from 1.83% and the yield on the 30-year Treasury bond decreased to 2.63% from 2.64%.
The 10-year muni to Treasury ratio was calculated at 90.6% on Tuesday compared to 90.5% on Friday, while the 30-year muni to Treasury ratio stood at 93.2% versus 92.8%, according to MMD.
Prior Week's Actively Traded Issues
Revenue bonds comprised 53.06% of new issuance in the week ended May 27, down from 53.32% in the previous week, according to data
General obligation bonds comprised 39.99% of total issuance, up from 39.62%, while taxable bonds made up 6.95%, down from 7.06%.
Some of the most actively traded issues by type were from New York and Virginia issuers. In the GO bond sector, New York City 4s of 2033 traded 67 times. In the revenue bond sector, the N.Y. MTA 5s of 2036 traded 55 times. And in the taxable bond sector, the Virginia HDA 3.1s of 2041 traded 21 times, Markit said.
Previous Week's Top Underwriters
The top negotiated and competitive underwriters of last week included JPMorgan Securities, Bank of America Merrill Lynch, RBC Capital Markets, PNC Financial Services and Citigroup, according to Thomson Reuters data. In the week of May 22-28, JPMorgan underwrote $1.23 billion, BAML did $1.18 billion, RBC had $866 million, PNC did $710 million and RBC had $701 million.
Primary Market
Buyers are looking to the week's $4.57 billion calendar, which is composed of $3.02 billion of negotiated deals and $1.55 billion of competitive sales.
On Wednesday, Pennsylvania will competitively sell $990.55 million of unlimited tax general obligation bonds consisting of $355 million of First Series of 2016 bonds and $635.55 million of First Refunding Series of 2016 bonds.
Public Financial Management is the financial advisor on the sale and Ballard Spahr is bond counsel.
The Keystone State sold two competitive offerings in 2015 totaling over $2 billion. On May 27, 2015, Bank of America Merrill Lynch won $1.24 billion of Series of 2015 GOs with a true interest cost of 3.59%. On Feb. 3, 2015, BAML won $1 billion of First Series of 2015 GOs with a TIC of 2.99%.
The bonds are rated Aa3 by Moody's Investors Service and AA-minus by S&P Global Ratings and Fitch Ratings.
Also on Wednesday, Goldman Sachs is set to price the Illinois Finance Authority's $134.24 million of revenue refunding bonds for the Northwest Community hospital. The deal is rated A2 by Moody's and A-plus by S&P.
RBC Capital Markets is expected to price Pima County, Ariz.'s $125.53 million of GO refunding bonds on Wednesday. The deal is rated AA-minus by S&P and Fitch.
Morgan Stanley is set to price the Dauphin County General Authority, Pa.'s $100 million of Series 2016A health system revenue bonds for the Pinnacle Health System on Wednesday.
On Thursday, the Dormitory Authority of the State of New York is coming to market with two separate negotiated deals totaling over $836 million.
Morgan Stanley will price DASNY's $589.98 million of Series 2016A tax-exempt revenue bonds for New York University while Wells Fargo Securities will price DANY's $246.38 million of Series 2016B taxable revenue bonds for New York University.
