Colorado HFA, Port of Seattle hit the market
The municipal bond market saw several large deals hit the screens on Thursday led by a Centennial State issuer.
JPMorgan Securities priced the Colorado Health Facilities Authority’s (Aa2/AA/AA) $484 million of Series 2019A and Series 2019B hospital revenue bonds for the AdventHealth Obligated Group.
Goldman Sachs priced the Port of Seattle, Washington’s (A1/A+/AA-) $460 million of Series 2019 intermediate lien revenue bonds, subject to alternative minimum tax.
JPMorgan also priced the Virginia Small Business Financing Authority’s (NR/BBB/BBB) $262 million of Series 2019 senior lien revenue bonds for the 95 Express Lanes LLC Project.
Muni money market funds see red
Tax-exempt municipal money market fund assets shrunk by $470.7 million, with total net assets settling at $138.93 billion in the week ended July 15 according to the Money Fund Report, a publication of Informa Financial Intelligence. This ends the streak of three consecutive weeks of minimum $1 billion inflows.
The average seven-day simple yield for the 187 tax-free and municipal money-market funds declined to 0.86% from 1.15% in the previous week.
Taxable money-fund assets fell $22.64 billion in the week ended July 16, bringing total net assets to $3.072 trillion, the fifth consecutive week that the taxable total has reached or exceeded $3 trillion.
The average, seven-day simple yield for the 804 taxable reporting funds increased to 1.97% from 2.02% the prior week.
Overall, the combined total net assets of the 991 reporting money funds dropped $23.11 billion to $3.211 trillion in the week ended July 16.
Summer coasts into busy fall
Constructive dynamics are helping to bolster municipal bonds as the summer progresses, according to a new report from Morgan Stanley Wealth Management.
“Muni blue skies have been fostered by benign credit conditions, lower supply, and a bond-friendly tax environment where the tax-exemption was fully preserved during reform and demand was supported by the limitation of the state and local tax (SALT) deduction,” analysts Matthew Gastall and Monica Guerra wrote in the July 17 weekly report.
“Outside the possibility for broader interest rate weakness, this favorable state and local government environment may not change anytime soon,” Gastall, executive director, and Guerra, vice president, said.
Investors are also facing the imbalance of summer reinvestment season and the typical mid-year volume deceleration in July and August.
“These developments typically coincide to create an investment setting where demand accelerates and supply declines, which can constructively impact investor, trader, and dealer sentiment,” the analysts wrote.
They suggested that investors may soon have fewer options to choose from at a time when they should be “a little picky,” and that the current environment might “end, or reverse, this fall more swiftly than it has in past years.”
As a result Morgan Stanley Wealth Management is advising investors to plan ahead with expectations that volume should increase in the upcoming fourth quarter versus the first half.
“The current seasonal backdrop is constructive, but appears to have the potential to significantly change this fall,” Gastall and Guerra said.
According to ICE data, a 67% decline in bond redemptions are expected in September — a jump from the 49% average posted over the same period in the prior two years.
“Autumn typically experiences the reciprocal of the aforementioned seasonals, as redemption-driven reinvestment demand often wanes while primary market activity accelerates,” they added.
Lower nominal yields, tight credit spreads, a flatter yield curve, and very manageable relative-value metrics versus U.S. Treasuries may attract more issuers to tap the primary to address financing needs, the analysts predicted.
Additionally, they said current relative-value metrics still suggest that municipals have little “room to run,” with the risk of becoming more expensive versus Treasuries — if broader interest-rate weakness transpires.
Munis were stronger in late trade on the MBIS benchmark scale, with yields falling one basis point in the 10-year and by a basis point in the 30-year maturity. High-grades were weaker, with MBIS’ AAA scale showing yields rising by less than one basis point in the 10- and 30-year maturitiies.
On Refinitiv Municipal Market Data’s AAA benchmark scale, the yield on both the 10- and 30-year GOs were unchanged at 1.56% and 2.27%, respectively.
The 10-year muni-to-Treasury ratio was calculated at 76.5% while the 30-year muni-to-Treasury ratio stood at 88.4%, according to MMD.
Treasuries were stronger as stocks traded mixed. The Treasury three-month was yielding 2.085%, the two-year was yielding 1.764%, the five-year was yielding 1.776%, the 10-year was yielding 2.031% and the 30-year was yielding 2.558%.
Previous session's activity
The MSRB reported 36,452 trades Wednesday on volume of $13.81 billion. The 30-day average trade summary showed on a par amount basis of $11.52 million that customers bought $6.09 million, customers sold $3.45 million and interdealer trades totaled $1.98 million.
California, Texas and New York were most traded, with the Golden State taking 14.868% of the market, the Lone Star State taking 12.549% and the Empire State taking 11.483%.
The most actively traded security was the New Jersey Economic Development Authority Series 1997 revenue refunding zeros of 2020, which traded 84 times on volume of $30.06 million.
Majority of BB Indexes dip slightly
In the week ended July 18, the weekly average yield to maturity of the Bond Buyer Municipal Bond Index, which is based on 40 long-term bond prices, was unchanged from 3.69% the previous week.
The Bond Buyer's 20-bond GO Index of 20-year general obligation yields dipped one basis point to 3.45% from 3.46% the week before. It is at its lowest level since Jan. 4, 2018, when it was at 3.44%.
The 11-bond GO Index of higher-grade 11-year GOs was one basis point lower to 2.99% from 3.00% the previous week. It is at its lowest level since Jan. 4, 2018, when it was at 2.94%.
The Bond Buyer's Revenue Bond Index declined one basis point to 3.93% from 3.94% the week before. It is at its lowest level in 80 weeks, when it was at 3.92%.
The yield on the U.S. Treasury 10-year sunk to 2.03% from 2.13% and the 30-year Treasury decreased to 2.56% from 2.64%.
Treasury auctions announced
The Treasury Department announced these auctions:
- $32 billion seven-year notes selling on July 25;
- $41 billion five-year notes selling on July 24;
- $40 billion two-year notes selling on July 23;
- $20 billion two-year floating rate notes selling on July 24;
- $36 billion 182-day bills selling on July 22; and
- $36 billion 91-day bills selling on July 22.
Treasury auctions TIPS, bills
The Treasury Department sold $14 billion of inflation-indexed 10-year TIPs at a 0.282% high yield, an adjusted price of 99.795681, with a 1/4% coupon. The bid-to-cover ratio was 2.28.
Tenders at the market-clearing yield were allotted 76.06%. Among competitive tenders, the median yield was 0.218% and the low yield 0.088%, Treasury said.
Treasury also auctioned $35 billion of four-week bills at a 2.090% high yield, a price of 99.837444. The coupon equivalent was 2.128%. The bid-to-cover ratio was 2.93. Tenders at the high rate were allotted 81.47%. The median rate was 2.080%. The low rate was 2.030%.
Treasury also auctioned $35 billion of eight-week bills at a 2.120% high yield, a price of 99.670222. The coupon equivalent was 2.162%. The bid-to-cover ratio was 2.45. Tenders at the high rate were allotted 34.35%. The median rate was 2.090%. The low rate was 2.055%.
Gary E. Siegel contributed to this report.
Data appearing in this article from Municipal Bond Information Services, including the MBIS municipal bond index, is available on The Bond Buyer Data Workstation. Click here for a brief tour of the Workstation, or contact Ziad Saba at 212-803-6079 for more information.