Municipal bond traders got a surge of new issuance on Tuesday, ahead of the of the two-day monetary policy meeting of the Federal Open Market Committee.
Secondary Market
U.S. Treasuries were mixed on Tuesday around midday. The yield on the two-year Treasury rose to 0.76% from 0.73% on Monday as the 10-year Treasury yield was flat at 1.57% and the yield on the 30-year Treasury bond slid to 2.28% from 2.29%.
Top-quality municipal bonds were steady on Tuesday. The yield on the 10-year benchmark muni general obligation was unchanged from 1.45% on Monday, while the yield on the 30-year muni was flat from 2.15%, according to a read of Municipal Market Data's triple-A scale.
On Monday, the 10-year muni to Treasury ratio was calculated at 92.1% compared to 92.6% on Friday, while the 30-year muni to Treasury ratio stood at 93.8% versus 94.1%, according to MMD.
Primary Market
The primary continued to see lots of refunding bonds in this low rate environment, even as the FOMC gathers in Washington. The Federal Reserve is expected to stand pat when it announces its decision on Wednesday.
The action in the primary got started on Tuesday, as a handful of deals priced, including the largest deal of the week, which came in larger than anticipated, and another deal hitting screens one day earlier than expected.
On Tuesday, JPMorgan Securities priced the Illinois Finance Authority's $1 billion of Series 2016C revenue bonds for the Presence Health Network. The bonds were priced to yield from 2.18% with a 5% coupon in 2020 to 3.94% with a 3.75% coupon and 3.62% with a 5% coupon in a split 2034 maturity. A term bond in 2036 was priced as 4s to yield 4.03% and as 5s to yield 3.68% in a split maturity and a term bond in 2041 was priced as 4s to yield 4.10% and as 5s to yield 3.70% in a split maturity.
The deal is was upsized from its expected $968 million and is rated Baa3 by Moody's Investors Service, BBB-minus by S&P Global Ratings and BBB by Fitch Ratings.
Morgan Stanley priced the California Health Facilities Financing Authority's $849.73 million of revenue bonds for Sutter Health one day earlier than expected. The $749.73 million of series 2016B bonds were priced to yield from 1.32% with a 5% coupon in 2023 to 2.38% with a 5% coupon in 2036. A term bond in 2038 was priced as 4s to yield 2.75%, a term bond in 2041 was priced as 4s to yield 2.78% and a term bond in 2046 was priced as 5s to yield 2.48%.
The $100 million of series 2016C bonds were priced at par to yield 0.90% in a 2053 bullet maturity. The deal is rated Aa3 by Moody's and AA-minus by S&P and Fitch.
Since 2006, The California HFFA has issued about $15.79 billion of debt, with the largest issuance occurring in 2009 when it sold $2.3 billion of securities. This will be the first time since 2013 the authority has issued more than $1 billion in bonds in a year, something it has done 7 times since 2006.
Bank of America Merrill Lynch priced the Indiana Finance Authority's $468.045 million of highway revenue refunding bonds to yield from 0.93% with a 5% coupon in 2020 to 1.94% with a 5% coupon and 2.14% with a 5% coupon in a split 2029 maturity. The deal is rated Aa1 by Moody's and AA-plus by S&P and Fitch.
Morgan Stanley priced the Rhode Island Health and Educational Building Corp.'s $267.175 million of Series 2016 hospital financing revenue refunding bonds for the Lifespan Obligated Group. The bonds were priced to yield from 1.22% with a 5% coupon in 2018 to 3.40% with a 4% coupon in 2036. A term bond in 2039 was priced as 5s to yield 3.10%. The 2017 maturity was offered as a sealed bid.
And Goldman Sachs is set to price Ohio's $217.19 million of major new state infrastructure project revenue bonds. The deal is rated Aa2 by Moody's and AA by S&P.
In the competitive sector on Tuesday, Miami-Dade County, Fla., sold two separate issues totaling $216.77 million.
The larger deal of $185.37 million of Series 2016B capital asset acquisition special obligation refunding bonds which were won by Bank of America Merrill Lynch with a true interest cost of 2.54%. The bonds were priced to yield from 0.62% with a 5% coupon in 2017 to 3.175% with a 3.125% coupon in 2037.
The other deal of $31.405 million of Series 2016A capital asset acquisition special obligation bonds were won by PNC Capital Markets with a TIC of 3.19%.
Both deals are rated Aa3 by Moody's and AA-minus by S&P.
The Florida Board of Education competitively sold $213.1 million of lottery revenue refunding bonds, which were won by Morgan Stanley with a TIC of 1.46%. No other pricing information was immediately available. The deal is rated A1 by Moody's, AAA by S&P and AA by Fitch.
