Turnpike, airport deals hit the market; Refinitiv Lipper sees $615M inflow

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There was plenty of action in the municipal bond market on Thursday as billions of dollars of bonds were placed into investors' hands.

Municipals traded little changed for most of the day, with yields steady to slightly stronger along the AAA scales.

“Muni bonds are posting small gains, helped by the global flight-to-quality move,” ICE Data Services said. “Trade volumes are in line with yesterday’s level.”

Investors put more cash back into tax-exempt mutual funds, with Refinitiv Lipper reporting muni bond funds saw nearly $615 million of inflows in the latest reporting week.

Primary market
Barclays Capital priced the City and County of Denver, Colo.’s $705.5 million of taxable and $217.56 million of tax-exempt airport system revenue bonds issued on behalf of Denver’s Department of Aviation.

Wells Fargo Securities priced the North Carolina Turnpike Authority’s (/BBB/BBB/) $499.46 million of senior lien turnpike revenue bond anticipation notes for the Triangle Expressway System.

JPMorgan Securities priced the Oklahoma Turnpike Authority’s (Aa3/AA-/AA-/NR) $366.36 million of Oklahoma Turnpike System bonds consisting of $179.165 million of Series 2020B taxable second senior revenue refunding bonds and $187.195 million of Series 2020A tax-exempt second senior revenue refunding bonds.

The tax-exempts were priced as 5s to yield from 0.19% in 2022 to 1.44% in 2033. The taxables were priced at par to yield from 0.491% in 2022 to 2.072% in 2033.

Barclays Capital priced Atlanta, Ga.’s (Aa2/AA-/NR/NR) $504.59 million of taxable water and wastewater revenue refunding bonds. The bonds were priced at par to yield from 0.191% in 2021 to 1.637% in 2029, 2.257% in 2035 and 2.913% in 2043.

JPMorgan Securities priced and repriced Detroit, Mich.’s (Ba3/BB-/NR/NR) $80 million of Series 2020 unlimited tax general obligation bonds.

The bonds were repriced to yield from 1.62% with a 5% coupon in 2021 to 4.03% with a 5.5% coupon in 2040. A 2045 maturity was priced as 5.5s to yield 4.07% and a 2050 maturity was priced as 5.5s to yield 4.12%.

The bonds had been tentatively priced to yield from 1.79% with a 5% coupon in 2021 to 4.11% with a 5.5% coupon in 2040. A 2045 maturity was priced as 5.5s to yield 4.23% and a 2050 maturity was priced as 5.5s to yield 4.28%.

Benefitting from yields that have held the 10-year top-rated benchmark below the 1% mark, Detroit’s yields came in lower than its first post-Chapter 9 bankruptcy sale in December 2018, but spreads for the junk-paper widened.

The tentative pricing wire offered the 10-year at a 3.80% yield with a 5% coupon, a 285 basis point spread to the AAA benchmark set at the close from the prior day. The 20-year bond offered at a 4.11% yield with a 5.50% coupon, for a 260 basis point spread, and the 30-year offered a 4.28% yield with a 5.50% coupon, a 255 basis point spread. Bonds out after 10 years offered 5.50% coupons.

In the repricing, Detroit shaved five basis points off its 10-year initial yield, eight basis points off its 20-year, and 16 basis points off the long bond maturing in 2050.

The city’s 2018 sale marked the city’s first stand-alone borrowing without any direct state intercepts or support since it emerged from Chapter 9 bankruptcy in 2014. The 10-year maturity in the junk-rated deal landed at a 4.45% yield, a 202 basis point spread to Refinitiv Municipal Market Data’s AAA benchmark, and the final 20-year landed at 4.95% yield, a 198 basis point spread. Both offered 5% coupons.

Citigroup priced the South Jersey Transportation Authority’s $325 million of transportation system revenue bonds.

The $298.91 million of Series 2020A bonds (Baa2/BBB+/BBB+/NR) was priced as 4s to yield 3.06% in 2040, as 5s to yield 2.62% in 2041, as 5s to yield 3.02% in 2045 and as 4s to yield 3.30% in 2050. The 2041 maturity was insured by Build America Mutual and rated AA by S&P. The $26.09 million of Series 2020A subordinated bonds (Baa3/AA/BBB-/NR) were priced as 5s to yield 2.92% in 2045 and as 4s to yield 3.17% in 2050. The series was insured by BAM.

In the competitive arena, Virginia (Aaa/AAA/AAA/NR) sold $221.84 million of general obligation bonds in two offerings.

Wells Fargo Securities won the $118.72 million of Series 2020B taxable refunding GOs with a true interest cost of 1.2432%. The bonds were priced to yield from 0.25% with a 1.25% coupon in 2022 to 1.91% at par in 2036.

Morgan Stanley won the $103.12 million of Series 2020A with a TIC of 1.5383%. The bonds were priced to yield from 0.14% with a 4% coupon in 2021 to 1.98% with a 1.875% coupon in 2040.

Public Resources Advisory Group was the financial advisor; Kaufman & Canoles was the bond counsel.

Westchester County, N.Y., (Aa1/AA+/AA+/NR) competitively sold $116.922 million in three issues.

Jefferies won the $62.245 million of Series 2020A tax-exempt GOs with a TIC of 1.131%. Wells Fargo won the $50.92 million of Series 2020C taxable GOs. Robert W. Baird won the $3.757 million of Series 2020B taxable GOs with a TIC of 0.7853%.

Capital Markets Advisors was the financial advisor; Hawkins Delafield was the bond counsel.

Fort Worth, Texas, (NR/AA+/AA+/NR) sold $103.21 million of drainage utility system revenue refunding and improvement bonds.

Wells Fargo Securities won the bonds with a TIC of 1.957%. The deal was priced to yield from 0.19% with a 5% coupon in 2021 to 2.359% with a 2.25% coupon in 2045.

RBC Capital Markets received the written award on Wisconsin’s (Aa1/AA/NR/AA+) $236.54 million of Series 2 refunding GO forward delivery bonds. Siebert Williams Shank received the official award on the St. Louis Municipal Finance Corp.’s (A2/AA/NR/AA+) $99.79 million of Series 2020 leasehold revenue bonds for convention center expansion and improvement projects. The bonds were insured by Assured Guaranty Municipal Corp.

What’s the future of green bonds in the U.S.?
Depending on its outcome, the U.S. election will have a neutral to positive impact on the green bond market's growth, according to UBS Global Wealth Management.

European issuers account for 43% of the market volume, followed by North America and the Asia-Pacific region.

“The U.S. currently represents the largest green bond market. However, various market specifics — e.g., eliminated tax exemptions for advanced refunding, missing governmental guidelines, lack of clear price advantage over traditional bonds — lead to slower growth compared to other regions and what one would expect from one of the world's largest financial markets,” UBS’ Thomas Wacker, Michaela Seimen and Michael Bolliger wrote in a research report released Thursday.

They said, according to the Milken Institute, the deteriorating infrastructure in the U.S. is underprepared to address the challenge of adapting to climate change.

Additionally, the institute cited a report by the American Society of Civil Engineers that estimates it will cost $2 trillion to bring the infrastructure in America into a state of good repair and an additional $2 trillion to deal with the effects of climate change, which UBS said strengthens the case for green bond issuance.

“While we have seen state-level progress as noted in Milken Institute’s most recent report, there is still ample space for improvement at the state and federal level policy frameworks to incentivize further issuance,” the report said. “Given state-level initiatives and the demands of climate change being recognized by the market, we do not expect a status quo outcome of the federal election to slow down market growth for green bonds.”

Informa: Money market muni funds fell $299M
Tax-exempt municipal money market fund assets fell $299.3 million, bringing total net assets to $113.97 billion in the week ended Oct. 12, according to the Money Fund Report, a publication of Informa Financial Intelligence.

The average seven-day simple yield for the 187 tax-free and municipal money-market funds remained at 0.02% from the previous week.

Taxable money-fund assets dropped $14.11 billion in the week ended Oct. 13, bringing total net assets to $4.188 trillion.

The average, seven-day simple yield for the 778 taxable reporting funds remained at 0.01% from the prior week.

Overall, the combined total net assets of the 965 reporting money funds fell $14.41 billion in the week ended Oct. 13.

Refinitiv Lipper reports $615M inflow
In the week ended Oct. 14, weekly reporting tax-exempt mutual funds saw $614.447 million of inflows. It followed a gain of $1.729 billion in the previous week and a loss of $774.747 million in the before that.

Exchange-traded muni funds reported inflows of $191.893 million, after inflows of $220.101 million in the previous week. Ex-ETFs, muni funds saw inflows of $422.553 million after inflows of $1.509 billion in the prior week.

The four-week moving average remained positive at $516.803 million, after being in the green at $516.182 billion in the previous week.

Long-term muni bond funds had inflows of $170.662 million in the latest week after inflows of $839.739 million in the previous week. Intermediate-term funds had inflows of $14.194 million after inflows of $61.026 million in the prior week.

National funds had inflows of $652.176 million after inflows of $1.661 billion while high-yield muni funds reported outflows of $85.651 million in the latest week, after inflows of $349.441 million the previous week.

Secondary market
Some notable trades on Thursday:

Maryland GOs 5s of 2023, traded at 0.18%. Los Angeles Community College District 4s of 2024, traded at 0.21%-0.19%. Georgia GOs 5s of 2025 at 0.28%. Arlington County, Virginia, GOs 5s of 2026, at 0.44%-0.30%, same as Wednesday down from the 0.46% original. NYC TFA 5s of 2029 traded at 1.20%-1.18% after trading yesterday at 1.23%. Texas Water 5s of 2030 at 1.08%. Klein Texas ISD 4s of 2032 at 1.30%-1.28%. Houston Port 5s of 2033 at 1.38%-1.31%. NYC TFA 5s of 2037 at 1.88%. Texas Water 4s of 2045 at 1.81%-1.85%, Wednesday at 1.87%-1.80%. Conroe Texas ISD 2.25s of 2046 at 2.29%. Wednesday they traded at 2.32%-2.20%.

High-grade municipals were mixed on Thursday, according to final readings on Refinitiv MMD’s AAA benchmark scale.

Yields in 2021 and 2022 rose one basis point to 0.15% and 0.15%, respectively. The yield on the 10-year muni dropped one basis point to 0.94% while the 30-year yield declined one basis point to 1.72%.

The 10-year muni-to-Treasury ratio was calculated at 125.9% while the 30-year muni-to-Treasury ratio stood at 112.8%, according to MMD

The ICE AAA municipal yield curve showed short maturities unchanged at 0.14% in 2021 and 0.16% in 2022. The 10-year maturity fell one basis point to 0.90% and the 30-year declined one basis point to 1.72%.

The 10-year muni-to-Treasury ratio was calculated at 123% while the 30-year muni-to-Treasury ratio stood at 113%, according to ICE.

The IHS Markit municipal analytics AAA curve showed yields at 0.13% in 2021 and 0.14% in 2022 as the 10-year muni declined one basis point to 0.95% and the 30-year dropped one basis point to 1.73%.

The BVAL AAA curve showed the yield on the 2021 maturity unchanged at 0.11%, the 2022 maturity unchanged at 0.13%, the 10-year off one basis point to 0.91% and the 30-year down one basis point to 1.72%.

Treasuries were weaker as stock prices traded down.

The three-month Treasury note was yielding 0.11%, the 10-year Treasury was yielding 0.73% and the 30-year Treasury was yielding 1.52%.

The Dow dropped 0.05%, the S&P 500 decreased 0.20% and the Nasdaq declined 0.60%.

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Primary bond market Secondary bond market Municipal bond funds City of Detroit, Denver City & County North Carolina Turnpike Authority Oklahoma Turnpike Authority County of Westchester, NY
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