Chicago's planned deals may not be part of this week's supply, which was originally estimated at $9 billion, as the Windy City put the nearly $400 million of transactions on hold as yields on its debt rose.
Market participants said the city may be rethinking how it will handle its planned reoffering of $800 million in floating-rate general obligation bonds, converting them to a fixed-rate. The city has not yet posted an updated offering statement on the transactions to reflect credit downgrades, including a cut to junk level last week by Moody's Investors Service.
Prices of top-shelf municipal bonds finished lower on Monday, traders said, as yields on some maturities rose by as much as three basis points.
Secondary Market
The yield on the 10-year benchmark muni general obligation rose three basis points to 2.28% from 2.25% on Friday, while the yield on the 30-year GO rose two basis points to 3.25% from 3.23%, according to the final read of Municipal Market Data's triple-A scale.
Trading was light overall, according to Interactive Data, which added that trading in Puerto Rico paper was active, following the tentative tax increase measure introduced last week, which appeared to be well-received by investors.
Chicago's Project Series 2011A GO 5s of 2040 traded at a low price of 84.171 and high yield of 6.27% on volume of $8.1 million on Monday, according to EMMA, after trading at a low price of 85.00 and a high yield of 6.195% on volume of $5.6 million on Friday.
The Puerto Rico 2014 commonwealth 8s of 2035 traded at a low price of 81.25 and a high yield of 10.211% on Monday on volume of $47.5 million compared to a low priced of 79.125 and a high yield of 10.513% on volume of $136.4 million on Friday, according to the Municipal Securities Rulemaking Board's EMMA website.
Treasury prices were lower on Monday as the yield on the two-year Treasury note rose to 0.57% from 0.53% on Friday, while the 10-year yield increased to 2.22% from 2.14% and the 30-year yield rose to 3.01% from 2.92%.
The 10-year muni to Treasury ratio was calculated on Monday at 102.5% versus 105.2% on Friday, while the 30-year muni to Treasury ratio stood at 109.5% compared to 110.4%, according to MMD.
Some Actively Traded Issues
Among some of the most actively traded issues in the week ended May 15, were issuers from New Jersey, Connecticut, and Chicago, according to Markit.
Broken down by market sector, revenue bonds comprised 55.53% of new issuance, up from 54.83% in the prior week. General obligation bonds comprised 36.75% of total issuance, down from 36.70%, while taxable bonds made up 7.72%, down from 8.47%.
In the revenue bond sector, the New Jersey Transportation Trust Fund Authority 5 1/4s of 2036 were traded 235 times. In the GO bond sector, the Connecticut 3 3/8s of 2029 were traded 118 times. And in the taxable bond sector, the Chicago Board of Education 6.519s of 2040 were traded 44 times, according to Markit.
Primary Market
On Tuesday, Atlantic City, N.J., is expected to be in the market with a $41 million bond sale - but that deal is backed by a state enhancement program. S&P rated the deal A-minus based on the state's Municipal Qualified Bond Act program.
Bank of America Merrill Lynch is slated to price the Series 2015A taxable GO refunding bonds under the state's MQBA, which is intended to facilitate distressed municipal issuers' access to the capital markets. For this deal, the program instructs the state Treasurer's office to withhold qualifying state aid from Atlantic City and directs the funding to be paid to bondholders.
Atlantic City, which is under an emergency manager's control as it faces a $101 million budget gap, will use the program to issue debt that will pay off a $40 million state loan, for which it received a 60-day extension in late March, and $12 million of maturing bond anticipation notes.
Atlantic City revenue director Michael Stinson said the city is on track to issue separate transactions through the MQBA program before Memorial Day. A taxable bond deal will be used to pay off the $40 million state loan Atlantic City owes by the end of May. A tax-exempt bond deal not exceeding $12 million will let city retire its maturing BANs.
Stinson said without New Jersey's credit enhancement program, accessing the municipal bond market would be very difficult at a time when payments are due.
"It's certainly a major help," said Stinson of the MQBA. "It does not appear we would be able to go to market without this program."
The city's GO debt is rated Caa1 by Moody's, while S&P rates the city BB.
On Tuesday, Barclays Capital is slated to price the Port Authority of New York and New Jersey's $500 million of consolidated bonds, 191st Series. The issue is rated Aa3 by Moody's and AA-minus by S&P and Fitch.
In addition, Jefferies is expected to price Miami-Dade County, Fla.'s $481.79 million of Series 2015 water and sewer system revenue refunding bonds. The bonds are rated Aa3 by Moody's and A-plus by S&P and Fitch.
And the New York City Municipal Water Finance Authority's $435 million of water and sewer system second resolution revenue bonds, Fiscal 2015 Series HH, will be priced by Barclays Capital on Tuesday after a retail order period on Monday. The bonds are rated AA-plus by S&P and AA by Moody's.
In the competitive arena on Tuesday, the Virginia Public Building Authority will sell $368.39 million of public facilities revenue bonds. The issue is comprised of $230.31 million of Series 2015A bonds and $138.08 million of Series 2015B refunding bonds. The issue is rated Aa1 by Moody's and AA-plus by S&P and Fitch.
The last time the Virginia PBA sold bonds competitively was on Aug. 27, 2014, when Wells Fargo Securities won $29.74 million of Series 2014B taxable public facilities revenue bonds with a true interest cost of 3.23%.
Topping the calendar this week is a $1 billion revenue bond issue from Florida's Citizens Property Insurance Corp. A retail order period is scheduled for Tuesday, which is preliminarily structured as $750 million of fixed-rate bonds with five, seven, and 10-year maturities, and $250-million in three-year floating rate notes. The institutional pricing is slated for Wednesday. The issue is rated A1 by Moody's, A-plus by S&P and AA-minus by Fitch.
The state of Connecticut is in the market again, this time with $481.62 million of Series 2015C and Series 2015D bonds. Loop Capital Markets is slated to price the issue on Wednesday, which will consist of $200 million SIFMA-indexed bonds and $281.62 million of general obligation bonds. The issue is rated Aa3 by Moody's and AA by S&P, Fitch and Kroll Bond Rating Agency.
Back in the competitive sector, Springfield, Mo., is selling $515 million of Series 2015 public utility refunding revenue bonds on Wednesday. The bonds are rated AA-plus by S&P and AA by Moody's. The last time Springfield was in the competitive market was on Sept. 14, 2006, when it sold $615 million of Series 2006 public utility revenue bonds to UBS Securities with a true interest cost of 4.54%.
Seattle, Wash., will offer $229.15 million of Series 2015 water system improvement and refunding revenue bonds on Wednesday. The issue is rated Aa1 by Moody's and AA-plus by S&P.
The last time the city sold bonds competitively was on May 15, 2012, when Citi won $238.77 million of Series 2012 water system refunding revenue bonds with a TIC of 2.62%.
Nassau County, N.Y., is selling $168.90 million of Series 2015 B general improvement bonds on Wednesday. The issue is rated A1 by Moody's, A-plus by S&P and A by Fitch.
The last time the county sold bonds competitively was on Jan. 21 when FTN Financial Capital Markets won $29.64 million of Series 2015A general improvement bonds with a TIC of 2.99%.
The Santa Clara Finance Authority, Calif., is selling $103.37 million of Series 2015P refunding lease revenue bonds for multiple facilities projects on Wednesday. The issue is rated AA-plus by S&P and AA by Fitch.
The last time the authority competitively sold bonds was on April 8, 2014, when Morgan Stanley won $11.72 million of Series 2014 O refunding lease revenue bonds for multiples facilities projects with a TIC of 1.92%.
