Municipal bonds finished Wednesday's session stronger by as much as four basis points, according to traders, even as a second wave of new issues hit the market.
Secondary Market
The yield on the 10-year benchmark muni general obligation was off three basis points to 2.11% from 2.14% on Tuesday, while the 30-year yield was four basis points weaker at 3.07% from 3.11%, according to the final read of Municipal Market Data's triple-A scale.
Treasury prices were narrowly mixed on Wednesday. The two-year Treasury yield rose to 0.87% from 0.85% on Monday while the 10-year Treasury yield increased to 2.27% from 2.25% and the 30-year yield was unchanged from 3.04%.
The 10-year muni to Treasury ratio was calculated on Wednesday at 102.1% from 94.1% on Tuesday, while the 30-year muni to Treasury ratio stood at 104.2% compared to 101.1%, according to MMD.
Primary Market
The market saw more large deals come to market on Wednesday after over $4 billion of offerings were priced on Tuesday to a good reception.
"How deep are the pockets of muni buyers?" MMD Senior Market Analyst Randy Smolik asked in a market comment. "We have yet to see one instance of underwriters cheapening negotiated sales in one of the heftiest weeks of issuance. In most cases, we saw spreads pared in final pricings."
Ramirez & Co. priced and repriced the Illinois State Toll Highway Authority's $400 million of senior revenue bonds on Wednesday to lower yields from five to seven basis points.
The issue was priced as 5s to yield from 2.77% in 2027 to 3.59% in 2037; a 2040 term was priced as 5s to yield 3.65%.
Ahead of the sale, Moody's Investors Service, Standard & Poor's and Fitch Ratings affirmed their ratings on the authority's $5.8 billion of outstanding debt secured by toll revenues. The new deal is rated Aa3 by Moody's and AA-minus by S&P and Fitch. All three agencies assign a stable outlook.
The authority operates under its own independent statutes with its revenues and operations segregated from that of the state but its leaders are appointed by the governor. Proceeds from the sale will finance ongoing projects in system's 15-year "Move Illinois" program while some will go into the debt service reserve.
Barclays Capital Markets, Goldman Sachs, and JPMorgan were co-senior managers on the deal. Public Financial Management and Columbia Capital Municipal Advisors were advisors for the authority while Chapman and Cutler was bond counsel on the deal.
Citigroup priced the San Diego Unified School District, Calif.'s $450 million of 2016 general obligation bonds, consisting of $350 million of Series F GOs and $100 million of Series G GO green bonds.
The series F bonds were priced to yield from 2.32% with a 5% coupon in 2026 to 3.47% with a 4% coupon in 2035. A 2040 term bond was priced to yield from 3.27% with a 5% coupon and a 2045 split maturity term bond was priced to yield 3.74% and 3.33% with a 4% coupon and 5% coupon.
The series G bonds were priced to yield from 2.32% with a 4% coupon in 2026 to 3.47% with a 4% coupon in 2035. A 2040 term bond was priced to yield 3.27% with a 5% coupon and a 2045 term bond was priced to yield 3.74% with a 4% coupon.
The deal was rated Aa2 by Moody's, triple-A by Fitch and AA-plus by Kroll Bond Rating Agency.
The bonds were issued as current interest bonds under the Election of 2012 approval and are dedicated unlimited ad valorem property tax bonds. It was the sixth and seventh issuance of GOs under the Election of 2012 mandate.
Morgan Stanley priced the Miami Beach Redevelopment Agency's $287.24 million of Series 2015A tax increment revenue and revenue refunding bonds for the City Center/Historic Convention Village.
The issue was priced to yield from 0.79% with a 4% coupon in 2017 to 3.67% with a 5% coupon in 2035. A 2040 term bond was priced as 5s to yield 3.74% and a 2044 term was priced as 5s to yield 3.80%.
The deal was rated A1 by Moody's and A by S&P except for the 2031, 2040 and 2044 maturities which were insured by AGM and rated AA by S&P.
JP Morgan priced the state of Mississippi's $177.33 million of Series 2015F GOs. The bonds were priced to yield from 2.66% with a 3% coupon in 2026 to 3.54% with a 4% coupon in 2035. The deal was rated Aa2 by Moody's, AA by S&P and AA-plus by Fitch.
In the competitive arena, Montgomery County, Md., sold $300 million of Series 2015B general obligation consolidated public improvement bonds.
Bank of America Merrill Lynch won the issue with a true interest cost of 2.80%. The issue was priced to yield from 0.30% with a 5% coupon in 2016 to 3.38% with a 3.25% coupon in 2035. The bonds were rated triple-A by Moody's, S&P and Fitch.
Since 2006, Montgomery County has issued roughly $4.71 billion of debt. MoCo sold its largest amount of bonds in 2011 and 2014, when it issued $719 million and $810 million, respectively. The county sold its lowest amount of bonds in the consecutive years of 2006 and 2007, when it came to market with $200 million and $299 million, respectively. On average in the past 10 years, the MoCo has come to market four times a year.
