Yields Plummet 16 bps as New Issuance Flows In

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As more new issuance hit the market on Wednesday, yields plunged as much as 16 basis points on the long end, according to traders.

Primary Market

Pennsylvania competitively sold $613.145 million of general obligation refunding bonds, second refunding series of 2016, on Wednesday, with JP Morgan winning the bid with a true interest cost of 2.73%. No pricing information was immediately available. The deal is rated Aa3 by Moody's Investors Service and AA-minus by S&P Global Ratings and Fitch Ratings.

New Jersey competitively sold $300 million of various purpose GOs, which were won by Bank of America Merrill Lynch with a TIC of 3.76%. The bonds were priced to yield from 1.61% with a 5% coupon in 2018 to 4.146% with a 4% coupon in 2037. The bonds are rated A2 by Moody's, A-minus by S&P and A by Fitch.

In the negotiated sector, Citigroup priced the Central Puget Sound Regional Transit Authority, Wash.'s $400 million of Series 2016 S-1 sales tax and motor vehicle excise tax green bonds. The bonds were priced to yield from 1.91% with a 5% coupon in 2021 to 3.31% with a 5% coupon in 2036. A term bond in 2041 was priced to yield 3.43% with a 5% coupon and a term bond in 2046 was priced to yield 3.78% with a 5% coupon. The deal is rated Aa2 by Moody's and AAA by S&P.

Since 2007, the Puget Sound RTA has sold roughly $2.5 billion of securities, with the highest issuance occurring in 2015 when it sold $943 million. The authority did not issue any bonds in 2008, 2010, 2011, 2013 or 2014.

RBC Capital Markets priced the county of Sacramento's $183.79 million of airport system senior revenue refunding and subordinate bonds. The $89.78 million of senior bonds were priced to yield 3.83% with a 5% coupon in a 2041 bullet maturity.

The $94.01 million of subordinate bonds were priced to yield from 3.82% with a 5% coupon in 2035 to 3.86% with a 5% coupon in 2036. A term bond in 2041 was priced to yield 3.98% with a 5% coupon. The senior bonds are rated A3 by Moody's and A by S&P, while the subordinate bonds are rated Baa1 by Moody's and A-minus by S&P.

Retail investors also were able to get in on the action, as JPMorgan priced for retail the New York City Housing Development Corporation's $316.36 million of multi-family housing revenue sustainable neighborhood bonds. The $151.015 million of 2016 Series I-1 bonds were priced at par to yield from 1.90% and 1.95% in a split 2020 maturity to 3.20% and 3.25% in a split 2027 maturity. The term bonds were priced at par to yield 3.75% in 2031, 4.05% in 2036, 4.20% in 2041, 4.30% in 2046, and 4.40% in 2050.

The $100.025 million 2016 Series I-2-A bonds were priced at par as a bullet maturity in 2020 to yield 2.05%, with a tender option date of Nov. 11, 2019.

The $65.32 million of 2016 Series I-2-B bonds were priced at par to yield 1.85% and 2.10% in a split 2021 bullet maturity. The first half of the maturity has a tender option date of Dec. 1, 2019, and the second half has a tender option date of July 1, 2020. The deal is rated Aa2 by Moody's and AA-plus by S&P.

Secondary Market

Top-rated municipal bonds were stronger on Wednesday around midday. The yield on the 10-year benchmark muni general obligation was between 13 and 15 basis points lower from 2.43% on Tuesday, while the yield on the 30-year decreased between 14 and 16 basis points from 3.23%, according to a read of Municipal Market Data's triple-A scale.

U.S. Treasuries were also stronger on Wednesday through midday. The yield on the two-year Treasury declined to 1.10% from 1.12% on Tuesday, the 10-year Treasury dropped to 2.35% from 2.39%, while the yield on the 30-year Treasury bond decreased to 3.03% from 3.08%.

The 10-year muni to Treasury ratio was calculated at 101.6% on Tuesday compared to 105.2% on Monday while the 30-year muni to Treasury ratio stood at 104.9% versus 108.8%, according to MMD.

MSRB: Previous Session's Activity

The Municipal Securities Rulemaking Board reported 59,129 trades on Tuesday on volume of $15.87 billion.

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