Top-quality municipal bonds finished unchanged on Thursday, traders said, as three large deals from the Land of Lincoln dominated the new issue slate, led by the $1 billion deal for O'Hare International Airport.
Bank of America Merrill Lynch priced Chicago's $1.02 billion of O'Hare airport senior lien revenue refunding bonds.
The $27.41 million of Series 2016A bonds, subject to the alternative minimum tax, were priced as 3s to yield 0.98% in 2017 and as 5s to yield from 1.62% in 2020 to 3.49% in 2037.
The $463.19 million of Series 2016B non-AMT bonds were priced to yield from 0.62% with a 5% coupon in 2017 to 3.22% with a 5% coupon in 2039; a 2041 maturity was priced as 5s to yield 3.23%.
The $527.48 million of Series 2016C non-AMT bonds were priced as 5s to yield from 0.62% in 2019 to 3.21% in 2038.
The deal is rated A by S&P Global Ratings and Fitch Ratings.
BAML also priced the Illinois Finance Authority's $107.96 million of Series 2016A tax-exempt bonds for the Swedish Covenant Hospital.
The issue was priced to yield from 1.42% with a 5% coupon in 2017 to 3.85% with a 5% coupon in 2037; a 2040 maturity was priced as 4 1/8s to yield 4.27%.
The deal is rated BBB by S&P and BBB-plus by Fitch.
In the competitive arena, the state of Illinois sold $480 million of Series of November 2016 general obligation bonds.
BAML won the bonds with a true interest cost of 4.2449%. The issue was priced as 5s to yield from 1.94% in 2017 to 4.48% in 2041.
The deal is rated Baa2 by Moody's, BBB by S&P and BBB-plus by Fitch.
The spread on Illinois’ 10-year maturity hit the 200 basis point mark. The yield on the deal's 10-year landed at 3.70%, 200 basis points over the MMD benchmark rate of 1.70% Thursday and 116 basis points over the 2.54% BBB benchmark.
The long bond maturing in 2041 yielded 4.48%, also 200 basis points over the triple-A rate of 2.48% and 116 basis points over the 3.32% BBB rate.
The 10-year maturity in the state's $1.3 billion GO refunding sale last month paid a yield of 3.63% with a 5% coupon, 193 basis points more than the top-rated MMD benchmark and 112 basis points over a comparable BBB benchmark credit.
The spreads have deteriorated from the state's sales earlier this year. The 10-year on a June sale landed at 3.32%, 185 basis points over the triple-A and 111 basis points over the Triple-B benchmark. The 10-year maturity in the state's January sale saw a yield of 3.33%, a 155 basis point spread to the triple-A.
Since 2006, the state of Illinois has issued roughly $29.9 billion of securities, with the highest amount coming in 2010 when the state sold a whopping $8.7 billion. The Prairie State did not issue any bonds in 2015. Thursday's sale puts the state over $3 billion of issuance for the year, the first time it has issued that much since 2013.
Secondary Market
The yield on the 10-year benchmark muni general obligation was flat from 1.70% on Wednesday, while the yield on the 30-year was steady from 2.53%, according to the final read of Municipal Market Data's triple-A scale.
"In general, there's definitely a wait and see until after the election feel to the muni market right now, not to mention you have the non-farm payroll release [on Friday]," said a New York trader. "But the market feels in much better shape than it did for the past few weeks as we come out of the heavy supply."
U.S. Treasuries were narrowly mixed on Thursday. The yield on the two-year fell to 0.81% from 0.82% on Wednesday, the 10-year Treasury rose to 1.82% from 1.80% and the yield on the 30-year Treasury bond increased to 2.61% from 2.56%.
Tax-Exempt Money Market Fund Outflows
Tax-exempt money market funds experienced outflows of $60.2 million, bringing total net assets to $128.15 billion in the week ended Oct. 31, according to The Money Fund Report, a service of iMoneyNet.com. This followed an inflow of $568.9 billion to $128.21 billion in the previous week.
The average, seven-day simple yield for the 238 weekly reporting tax-exempt funds dropped to 0.20% from 0.25% in the previous week.
The total net assets of the 861 weekly reporting taxable money funds increased $17.42 billion to $2.504 trillion in the week ended Nov. 1, after an inflow of $17.71 billion to $2.487 trillion the week before.
The average, seven-day simple yield for the taxable money funds gained to 0.14% from 0.13% the prior week.
Overall, the combined total net assets of the 1,099 weekly reporting money funds rose $17.36 billion to $2.632 trillion
