Municipal bonds keep pouring into the market, as issuers try to keep pace with demand.
Primary market
The market was bombarded with issuance once again Thursday, as billions of dollars in new deals priced.
“Muni demand is reacting to muni fundamentals versus rates, as supply is heavy but being well received,” said one Texas trader. “Underwriters are pricing loans conservatively allowing them to build a solid book.”
Competitive sales, which typically offer issuers lower interest rates than negotiated transactions, led the charge, with eight deals totaling $2.22 billion.
“Competitive deal bids are healthy but I would not say they are providing more value than the negotiated deals,” the trader said.
The Empire State Development Corp. (Aa1/NR/AA+) sold a total of $1.67 billion in five separate sales on Thursday.
Barclays won $458.28 million of bidding group 2 bonds with a true interest cost of 3.2129%.
JPMorgan won $419.29 million of bidding group 3 bonds with a TIC of 3.1993%.
JPMorgan also won $272.4 million of bidding group 1 bonds with a TIC of 1.553%
Morgan Stanley won $292.79 million of bidding group 1 taxable bonds with a TIC of 2.3487%.
And Jefferies won $231.585 million of bidding group 2 taxable bonds with a TIC of 2.8924%.
“The NY empire loan came right on expectations, although distribution is still working its way through the system,” the trader said.
Montgomery County, Mayland, sold $320 million of GO consolidated public improvement bonds. Morgan Stanley was the winner with a TIC of 2.2107%.
The Tulsa Public Facilities Authority sold $113.895 million of capital improvement revenue bonds. JPM was the winner with a TIC of 1.323%.
The City and County of San Francisco sold $112.585 million of refunding certificates of participation municipal capital improvement project bonds. Morgan Stanley won with a TIC of 1.8592%.
In the negotiated sector, JPMorgan priced California Statewide Communities Development Authority’s (NR/AA-/AA-) $509.475 million of remarketing revenue bonds for Kaiser Permanente on Thursday.
Morgan Stanley priced the Board of Regents of the Texas State University System’s (A2/NR/AA) $174.510 million of tax-exempt revenue refunding bonds. Morgan Stanley also priced the University System’s $149.48 million of taxable revenue refunding bonds.
“Both loans did very well, not sure one out did the other,” the Texas trader said. “Demand was very high.”
Piper Jaffrey priced the Riverside Community College District, California's (Aa1/AA/-) $140.365 million of election of 2004 general obligation refunding bonds.
Thursday’s bond sales
Secondary market
Munis were slightly stronger on the MBIS benchmark scale, with yields falling by less than one basis point in both the 10-year and 30-year maturities. The MBIS AAA scale was mixed, with yields decreasing by less than one basis point in the 10-year maturity and increasing by no more than one basis point in the 30-year maturity.
On Refinitiv Municipal Market Data’s AAA benchmark scale, the yield on both the 10- and 30-year remained steady at 1.51% and 2.10%, respectively.
The 10-year muni-to-Treasury ratio was calculated at 85.3% while the 30-year muni-to-Treasury ratio stood at 93.3%, according to MMD.
Stocks were mixed, with the Dow Jones industrial average the only major index trading in the red, as Treasuries were a mixed bag. The Treasury three-month was yielding 1.672%, the two-year was yielding 1.575%, the five-year was yielding 1.585%, the 10-year was yielding 1.758% and the 30-year was yielding 2.254%.
Muni money market funds sees third billion-dollar inflow in a row
Tax-exempt municipal money market fund assets gained $1.37 billion, raising its total net assets to $138.56 billion in the week ended Oct. 21, according to the Money Fund Report, a publication of Informa Financial Intelligence.
The average seven-day simple yield for the 191 tax-free and municipal money-market funds fell to 0.89% from 0.99% from the previous week.
Taxable money-fund assets were down $16.62 billion in the week ended Oct. 22, bringing total net assets to $3.298 trillion. The average, seven-day simple yield for the 806 taxable reporting funds was unchanged from 1.54% from the prior week.
Overall, the combined total net assets of the 997 reporting money funds decreased $18 billion to $3.437 trillion in the week ended Oct. 22.
Previous session's activity
The MSRB reported 34,956 trades Wednesday on volume of $11.88 billion. The 30-day average trade summary showed on a par amount basis of $10.72 million that customers bought $5.84 million, customers sold $2.99 million and interdealer trades totaled $1.88 million.
Texas, California and New York were most traded, with the Lone Star State taking 12.164% of the market, the Golden State taking 11.741% and the Empire State taking 10.372%.
The most actively traded security was the Hoover, Alabama, Industrial Development Board’s, revenue AMT 5.75s of 2049, which traded 46 times on volume of $81.35 million.
Treasury auctions
The Treasury Department Thursday auctioned $32 billion of seven-year notes, with a 1 5/8% coupon and a 1.657% high yield, a price of 99.789325. The bid-to-cover ratio was 2.46.
Tenders at the high yield were allotted 80.73%. All competitive tenders at lower yields were accepted in full. The median yield was 1.615%. The low yield was 1.400%.
Treasury also auctioned $55 billion of four-week bills at a 1.710% high yield, a price of 99.867000. The coupon equivalent was 1.741%. The bid-to-cover ratio was 2.75.
Tenders at the high rate were allotted 42.41%. The median rate was 1.680%. The low rate was 1.650%.
Treasury also auctioned $40 billion of eight-week bills at a 1.680% high yield, a price of 99.738667. The coupon equivalent was 1.712%. The bid-to-cover ratio was 2.85.
Tenders at the high rate were allotted 67.60%. The median rate was 1.650%. The low rate was 1.610%.
Bond Buyer yield indexes increase again
The weekly average yield to maturity of the Bond Buyer Municipal Bond Index, which is based on 40 long-term bond prices, rose to 3.62% for the week ended Oct.17 from 3.59% in the previous week.
The Bond Buyer's 20-bond GO Index of 20-year general obligation yields was higher by five basis points to 2.75% from 2.70% from the week before. The 11-bond GO Index of higher-grade 11-year GOs also gained five basis points, to 2.29% from 2.24% the prior week. The Bond Buyer's Revenue Bond Index increased five basis points to 3.23% from 3.18% last week.
The yield on the U.S. Treasury's 10-year note rose slightly to 1.77% from 1.76% the week before, while the yield on the 30-year Treasury increased to 2.26% from 2.24%.
Treasury bill announcement
The Treasury Department said Thursday it will auction $45 billion 91-day bills and $42 billion 182-day discount bills Monday.
The 91s settle Oct. 31, and are due Jan. 30, 2020, and the 182s settle Oct. 31, and are due April 30, 2020.
Currently, there are $61.994 billion 91-days outstanding and $26 billion 182s.
Gary E. Siegel contributed to this report.
Data appearing in this article from Municipal Bond Information Services, including the MBIS municipal bond index, is available on The Bond Buyer Data Workstation.
