Municipal bonds were stronger on Wednesday as buyers welcomed deals from from New York and California issuers.
Raymond James & Associates priced the Dormitory Authority of the State of New York’s $343.08 million of Series 2018-1 municipal health facilities improvement program lease revenue bonds, New York City issue for institutions after holding a one-day retail order period.
The deal is rated Aa2 by Moody’s Investors Service and AA-minus by S&P Global Ratings.
Since 2008, DASNY has sold about $64 billion of debt, with the most issuance occurring in 2015 when it sold $9.09 billion. It sold the least amount in 2013 when it issued $3.02 billion.
Los Angeles competitively sold $321.81 million of general obligation bonds in three sales.
Morgan Stanley won the $276.24 million of Series 2018A taxable social bonds with a true interest cost of 3.6950%.
Morgan Stanley also won the $34.995 million of tax-exempt Series 2018B GO refunding bonds with a TIC of 2.2129% and PNC Capital Markets won the $10.57 million of taxable Series 2018C GO refunding bonds with a TIC of 3.4593%.
Financial advisors are Public Resources Advisory Group and Omnicap Group; bond counsel is Nixon Peabody. The bonds are rated Aa2 by Moody’s and AA by S&P and Kroll Bond Rating Agency.
The DASNY deal was welcomed with open arms by investors who flocked to the availability and diversity of a popular New York issuer with a not so frequently-issued credit that priced amid an outperforming municipal market Wednesday afternoon, according to a New York trader.
“The market looks technically pretty strong and is trading up today by a decent amount -- close to a half a point in the belly in 10 years and up over a point on long end,” he explained. “The MMD is unchanged to a basis point up and cheapening on a ratio basis.”
The DASNY deal was strong, but the trader said that wasn’t surprising “given New York is a high tax state and with the elimination of SALT.”
He said that “California is another high tax state that has been trading rich and New York is now similar to California and is trading rich as well.”
The issuer name and purpose helped sell the bonds, he said. “It was DASNY but it was for mental health, and while that is not a new name, it’s a less issued name,” he said. “On the front end, SMAs and retail mom and pop buyers were all over it.”
The trader said investors seized the chance to take advantage of some buying opportunities ahead of an imminent slowdown as the market’s tone was strong and steady.
“Coming into a holiday, and no new issues next week, the market seems pretty content to ride off into the holiday where it is,” he said. “Some are taking advantage of the opportunity when the market is thin and could improve and look different after vacation,” he said.
He added that he expected Thursday’s market to be pretty much nonexistent ahead of the holiday next week.
“It’s all full steam ahead for munis right now, since we are seeing good outperformance today when there is way too much money chasing too few bonds,” he said.
Wells Fargo Securities priced the Lamar Consolidated Independent School District, Texas’ $289.315 million of Series 2018 unlimited tax schoolhouse bonds.
The deal, which is backed by the Permanent School Fund guarantee program, is rated triple-A by Moody’s and S&P.
Bank of America Merrill Lynch priced the West Virginia Finance Authority’s $218.55 million of Series 2018A hospital revenue improvement bonds for the West Virginia University Health System Obligated Group.
The deal is rated A2 by Moody’s and A by S&P.
JPMorgan Securities priced Colorado Spring, Colo.’s $226.815 million of revenue bonds.
The deal is rated Aa2 by Moody’s and AA by S&P and Fitch.
The Florida Department of Transportation competitively sold $245.28 million of Series 2018B right-of-way acquisition and ridge construction bonds. Citigroup won the bonds with a TIC of 3.5351%.
The deal is rated Aa1 by Moody’s and AAA by S&P and Fitch.
Wednesday's Bond sales
Click here for the DASNY pricing
Click here for the DOT sale
Click here for the F.A. deal
Bond Buyer 30-day visible supply at $2.76B
The Bond Buyer's 30-day visible supply calendar decreased $1.76 billion to $2.76 billion on Thursday. The total is comprised of $1.20 billion of competitive sales and $1.55 billion of negotiated deals.
S&P affirms BAM, Assured ratings
S&P Global Ratings said it has affirmed Build America Mutual's AA rating and stable outlook.
S&P said the action reflects BAM’s “strong market acceptance in the U.S. municipal sector, prudent underwriting discipline, and proven year-over-year growth in terms of par insured, premiums written, and risk-based pricing.”
S&P added the stable outlook reflects its view that BAM’s “competitive position will remain strong while its RAP ratio remains acceptable. As interest rates rise — potentially leading to credit spreads widening — we expect the market demand for bond insurance to increase.”
Separately, Assured Guaranty Ltd. announced that S&P affirmed the AA financial strength ratings on Assured Guaranty Municipal Corp., Municipal Assurance Corp. and Assured Guaranty Corp. The outlooks on these entities are stable.
S&P cited Assured Guaranty’s “very strong capital adequacy” along with a “proven track record of credit discipline and market leadership in terms of par insured and premiums written” and a “diverse underwriting strategy.”
S&P added that its “capital position could absorb losses on its entire exposure to issuers in Puerto Rico of roughly $3 billion and … there would be no change in Assured’s capital adequacy score or financial risk profile.”
Municipal bonds were stronger on Wednesday, according to a late read of the MBIS benchmark scale. Benchmark muni yields fell less than one basis point in the one- to 30-year maturities.
High-grade munis were also stronger with yields calculated on MBIS’ AAA scale rising less than one basis point across the curve.
Municipals were also stronger along Municipal Market Data’s AAA benchmark scale, which showed yields falling two basis points in both the 10-year muni general obligation and the 30-year muni maturity.
Treasury bonds were stronger as the 30-year bond yield fell under 3% as stock prices declined.
On Wednesday, the 10-year muni-to-Treasury ratio was calculated at 87.4% while the 30-year muni-to-Treasury ratio stood at 99.3%, according to MMD. The muni-to-Treasury ratio compares the yield of tax-exempt municipal bonds with the yield of taxable U.S. Treasury with comparable maturities. If the muni/Treasury ratio is above 100%, munis are yielding more than Treasury; if it is below 100%, munis are yielding less.
As trading activity continued on the light side Wednesday morning, a Pennsylvania trader said his firm was stocking inventory with high-quality bonds on the short end of the yield curve in anticipation for July 1 redemptions and post-holiday sales.
“From a trading standpoint, we’re bidding a lot, but there’s not a lot of trading,” he said Wednesday morning.
“There’s a lot of bid-wanteds, but not a lot of buying,” he added. “Tuesdays and Wednesday are usually active,” with the holiday lull expected to kick in closer to late Thursday and early Friday he said.
“It seems like you can always blame it on something; the holiday, the summer, a number coming out,” the trader said. “There are a lot of excuses for activity being light, but we’re stocking up our inventory and we’re ready,” for increased activity following the first week of July.
Previous session's activity
The Municipal Securities Rulemaking Board reported 40,321 trades on Tuesday on volume of $10.53 billion.
California, Texas and New York were the states with the most trades, with the Golden State taking 17.224% of the market, the Lone Star State taking 12.216% and the Empire State taking 10.053%.
Treasury sells $16B reopened 2-year notes
The Treasury Department Wednesday auctioned $16 billion of one-year 10-month floating rate notes with a high discount margin of 0.042%, at a 0.033% spread, a price of 99.983009. The bid-to-cover ratio was 2.79.
Tenders at the high margin were allotted 48.96%. The median discount margin was 0.030%. The low discount margin was 0.010%.
The index determination date is June 25 and the index determination rate is 1.900%.
Treasury auctions $36B 5-year notes
The Treasury Department auctioned $36 billion of five-year notes, with a 2 5/8% coupon, a 2.719% high yield, a price of 99.563565. The bid-to-cover ratio was 2.55.
Tenders at the high yield were allotted 83.93%. All competitive tenders at lower yields were accepted in full. The median yield was 2.680%. The low yield was 2.600%.
Gary 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 Vanessa Kim at 212-803-8474 for more information.