Presence Health's $1B Leads Busiest Day of the Week

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Municipal bond traders got a surge of new issuance on Tuesday, ahead of the second day of the monetary policy meeting of the Federal Open Market Committee. Munis ended the day mostly unchanged, according to traders, who said that some yields on the front end of the curve were down 1-3 basis points lower.

Secondary Market

U.S. Treasuries were mostly stronger at Tuesday's close. The yield on the two-year Treasury rose to 0.75% from 0.73% on Monday, as the 10-year Treasury yield was lower at 1.56% from 1.57% and the yield on the 30-year Treasury bond slid to 2.28% from 2.29%.

Top-quality municipal bonds were mostly 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 final read of Municipal Market Data's triple-A scale.

Primary Market

The primary continued to see lots of refunding bonds, which are geared to a low-rate environment as the FOMC gathered in Washington. The Federal Reserve is expected to stand pat when policy makers announce their decision on Wednesday.

"There were a few deals schedule to price tomorrow; one of those deals came today and I wouldn't be surprised to see another one not go until Thursday," said one New York trader. "Issuers typically don't like to go on FOMC announcement day."

An exception is a $200 million sale by the state of North Carolina, which is competitive and "should go as planned," he said.

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 and repriced the Illinois Finance Authority's $1 billion of Series 2016C revenue bonds for the Presence Health Network. The bonds were repriced to yield from 1.98% with a 5% coupon in 2020 to 3.94% with a 3.75% coupon and 3.55% with a 5% coupon in a split 2034 maturity. A term bond in 2036 was priced as 4s to yield 4.02% and as 5s to yield 3.58% in a split maturity and a term bond in 2041 was priced as 4s to yield 4.06% and as 5s to yield 3.60% 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.

"The demand for the Presence deal was strong, looks as though deal was upsized to match the demand it saw," said one Midwest trader. "Overall, the market was firmer in a few spots, there is so much demand out there and it looks as though the known names are pushing the market."

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 seven times since 2006.

Bank of America Merrill Lynch priced and then repriced the Indiana Finance Authority's $468.045 million of highway revenue refunding bonds to yield from 0.90% with a 5% coupon in 2020 to 1.98% with a 5% coupon and 2.11% 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.

Citigroup priced Tennessee's $298.635 million of tax-exempt general obligation bonds. The $174.53 million of series A bonds were priced to yield from 0.45% with a 3% coupon in 2017 to 2.05% with a 5% coupon in 2036.

The $124.105 million of refunding series B bonds were priced to yield 0.40% with a 5% coupon in 2017 and to yield from 1.18% with a 5% coupon in 2023 to 1.82% with a 5% coupon in 2031.The deal is triple-A by Moody's, S&P and Fitch.

Since 2006, the state of Tennessee has issued about $3.2 billion of debt, with the largest issuance occurring in 2009 when it sold $680 million of securities. The Volunteer State is a steady issuer, coming to market every year since 2006 with the exception of 2013 and have never brought more than $1 billion to market in a given year.

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.

Goldman Sachs priced Ohio's $218.225 million of major new state infrastructure project revenue bonds. The bonds were priced to yield from 0.69% with a 5% coupon in 2018 to 2.00% with a 5% coupon in 2028. The 2017 maturity was offered as a sealed bid. 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 $224.805 million.

The larger deal of $193.4 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%. The bonds were priced to yield from 0.69% with a 5% coupon in 2018 to 1.83% with a 5% coupon in 2027.The deal is rated A1 by Moody's, AAA by S&P and AA by Fitch.

"Longer treasury notes and the bond have traded narrowly this week ahead of the FOMC statement and correspondingly, muni trading has been mostly static for the past several sessions," MMD Senior Market Analyst Randy Smolik wrote in a market comment. "But, some encouragement may be found in the ability of negotiated underwritings to pare yields in their final offerings."

Bond Buyer Visible Supply

The Bond Buyer's 30-day visible supply calendar decreased $529.1 million to $11.91 billion on Wednesday. The total is comprised of $5.12 billion of competitive sales and $6.79 billion of negotiated deals.

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