California’s big bond offering came to market on Thursday and was well received by buyers, according to traders. In secondary activity, municipal bonds finished weaker.
JPMorgan Securities priced the state's $1.25 billion of taxable general obligation high-speed passenger train bonds in three series.
The whole deal was said to be several times oversubscribed.
“It comes as no surprise that the Cal deal was very well received,” said one New York trader. “There were over $4 billion in total orders and some maturities were as much as six times oversubscribed.”
The $648.07 million of Series 2017A fixed-rate bonds were priced to yield about 25 basis points over the comparable Treasury security in 2018, about 40 basis points over the comparable Treasury security in 2019, about 45 basis points over the comparable Treasury security in 2021 and about 60 basis points over the comparable Treasury security in 2022. There is no optional call.
The $300 million of Series 2017B mandatory put bonds were priced to yield about 79 basis points over the comparable Treasury security in 2047; the bonds have an optional call at par in 2019.
The $300 million of Series 2017C floating rate bonds were priced to yield about 78 basis points above the one-month Libor. The bonds have an optional call in 2021 at par.
The trader said that with the three different structures the deal had -- including a fixed-rate out to 2022, a 2020 PUT bond, and a monthly reset floating rate note – the sale generated “broad interest from all over the place.”
The deal is rated Aa3 by Moody’s Investors Service and AA-minus by S&P Global Ratings and Fitch Ratings.
RBC Capital Markets priced Houston, Texas’ $281.02 million of Series 2017B combined utility system first lien revenue refunding bonds.
The issue was priced to yield from 1.12% with a 4% coupon in 2019 to 2.60% with a 5% coupon in 2029 and from 2.95% with a 5% coupon in 2034 to 3.10% with a 5% coupon in 2038. A 2042 maturity was priced as 5s to yield 3.19% and a 2047 maturity was priced as 5s to yield 3.24%.
The deal is rated Aa2 by Moody’s and AA by Fitch.
Since 2007, Houston has issued about $13.66 billion of debt, with the most issuance occurring in 2014 when it sold $2.52 billion of securities. It saw a low of $485 million in 2015, one of only three times the Space City has not issued more than $1 billion in a year in the past decade.
The yield on the 10-year benchmark muni general obligation rose two basis points to 2.05% from 2.03% on Wednesday, while the 30-year GO yield increased four basis points to 2.90% from 2.86%, according to the final read of Municipal Market Data's triple-A scale.
U.S. Treasuries were weaker on Thursday. The yield on the two-year Treasury rose to 1.20% from 1.18% on Wednesday, while the 10-year Treasury yield gained to 2.24% from 2.21%, and the yield on the 30-year Treasury bond increased to 2.89% from 2.87%.
The 10-year muni to Treasury ratio was calculated at 92.1% on Thursday, compared with 92.1% on Wednesday, while the 30-year muni to Treasury ratio stood at 99.9%, versus 99.9%, according to MMD.
MSRB: Previous session's activity
The Municipal Securities Rulemaking Board reported 43,294 trades on Wednesday on volume of $11.62 billion.
Tax-exempt money market fund outflows
Tax-exempt money market funds experienced outflows of $1.19 billion, bringing total net assets to $129.15 billion in the week ended April 17, according to The Money Fund Report, a service of iMoneyNet.com.
This followed an inflow of $95.3 million to $130.34 billion in the previous week.
The average, seven-day simple yield for the 232 weekly reporting tax-exempt funds was unchanged at 0.39% from the previous week.
The total net assets of the 861 weekly reporting taxable money funds decreased $9.59 billion to $2.476 trillion in the week ended April 18, after an outflow of $3.56 billion to $2.485 trillion the week before.
The average, seven-day simple yield for the taxable money funds increased to 0.42% from 0.41% in the prior week.
Overall, the combined total net assets of the 1,091 weekly reporting money funds decreased $10.78 billion to $2.605 trillion in the week ended April 18, after outflows of $3.46 billion to $2.615 trillion in the prior week.