DFW bond issue flies into muni market; mutual funds see $2.1 billion of inflows

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Municipals were mostly stronger on Thursday as the Dallas-Fort Worth airport issue and Doris Duke social bond deals hit the market, rounding out the week’s last large offerings.

For the 11th straight week, investors remained remarkably bullish in mutual funds, with Refinitiv Lipper reporting inflows of $2.1 billion into bond funds for the week ended July 22.

Meanwhile, in a growing movement, social taxable bonds are making moves in the municipal space that benefit nonprofits.

Morgan Stanley priced the Doris Duke Charitable Foundation Inc.’s (Aaa/NR/NR/NR) $100 million of taxable social bonds, due July 1, 2050.

“The Doris Duke Charitable Foundation social bonds Series 2020 saw strong investor demand, allowing tightening of spreads by five basis points from the initial price talk, resulting in a final spread of +105 vs. the 30-year U.S. Treasury and a coupon/yield of just 2.345% (7/1/2050 maturity),” said Eric Wild, managing director at Morgan Stanley. "There was exceptionally strong demand from ESG investors, accounting for approximately 50% of the orders.”

Proceeds of the sale will be used to finance the foundation's causes, such as providing grant funding to support the performing arts, environmental conservation, medical research and child well-being and "to preserve the cultural and envirnomental legacy of Doris Duke's properties," according to the official statement.

Doris Duke (1912-1993) was a tobacco heiress and philanthropist. She funded work in AIDS research, medicine and child welfare and her fortune was left to mostly to the charity foundation.

On Wednesday, Goldman Sachs priced the Andrew W. Mellon Foundation's $300 million of taxable social bonds rated Aaa/AAA/NR/NR.

Carnegie Hall in Manhattan earlier this year.

Primary market
In other primary market news, Ramirez & Co. priced and repriced the cities of Dallas and Fort Worth, Texas’ (A1/A/A+/AA) $461.115 million of Series 2020B joint revenue refunding bonds not subject to the alternative minimum tax for the Dallas Fort Worth International Airport.

The bonds were repriced to yield from 0.27% with a 5% coupon in 2021 to 1.97% with a 4% coupon in 2040; a 2045 maturity was repriced to yield 2.12% with a 4% coupon.

The bonds had been tentatively priced to yield from 0.33% with a 5% coupon in 2021 to 2% with a 4% coupon in 2040; a 2045 maturity was priced to yield 2.17% with a 4% coupon.

Wells Fargo Securities priced Mississippi’s (Aa2/AA/AA/NR) $504.255 million of Series 2020A taxable general obligation refunding bonds.

The bonds were priced to yield from par to the U.S. Treasury security of 2020 to 140 basis points above the 2036 Treasury.

Morgan Stanley priced the Monroe County Industrial Development Corp., N.Y.’s (Aa3/AA-NR/NR) $364.205 million of Series 2020A revenue bonds for the University of Rochester.

The bonds were priced to yield from 0.25% with a 5% coupon in 2021 to 1.45% and 1.60% (non-callable) with 5% coupons, 1.98% with a 4% coupon in 2039 and 2.25% with a 4% coupon in 2050.

BofA Securities priced the Illinois Finance Authority’s (B3/NR/NR/NR) $225 million of Series 2020 recovery zone facility refunding revenue bonds for the Navistar International Corp.

The bonds were priced at par to yield 4.75% in 2040 with a mandatory tender in 2030.

JPMorgan Securities priced the Harris County Cultural Education Facilities Finance Corp., Texas’ (A1/A+/NR/NR) $137.755 million of Series 2020C hospital revenue refunding bonds for the Memorial Hermann Health System and its $8.235 million of hospital revenue refunding bonds.

BofA priced the Louisiana Children's Medical Center’s (NR/A+&AA/NR/NR) $96.23 million of Series 2020A hospital revenue bonds.

The deal was priced as a 2050 split maturity to yield 2.75% with a 3% and to yield 2.60% with a 4% coupon. Assured Guaranty Municipal insured the 3s of 2050.

JPMorgan received the written award on Auburn University, Ala.’s (Aa2/AA-NR/NR) $300 million of Series 2020-C taxable general fee revenue bonds.

Money market muni funds fall $3.1B
Tax-exempt municipal money market fund assets fell $3.11 billion, bringing total net assets to $122.68 billion in the week ended July 20, according to the Money Fund Report, a publication of Informa Financial Intelligence.

The average seven-day simple yield for the 187 tax-free and municipal money-market funds was increased to 0.4% from 0.02% in the previous week.

Taxable money-fund assets decreased $16.67 billion in the week ended July 21, bringing total net assets to $4.397 trillion.

The average, seven-day simple yield for the 788 taxable reporting funds remained at 0.05% from the prior week.

Overall, the combined total net assets of the 975 reporting money funds fell $19.77 billion in the week ended July 21.

Secondary market
Some notable trades Thursday:

Texas issuers were once again trading in large blocks. Humble, Texas ISD, 5s of 2023, traded at 0.22%. Fort Worth, Texas ISD 5s of 2030, landed at 0.86%. Collin-Fairbank, Texas community college 5s of 2031 traded at 0.96%-0.95%.

Meanwhile, high-grade names elsewhere were also moving the market firmer. Montgomery County, Maryland GOs, 5s of 2024 yielded 0.23%-0.21%. Metropolitan Council, Minnesota 5s of 2026 were at 0.35%. Washington GOs, 5s of 2033 yielded 1.08%.

Maryland GOs, 5s of 2034, traded at 1.02% from the original selling level of 1.04%. San Francisco BART green bonds, 3s of 2038, traded at 1.63%. And, Washington GOs from the recent deal, 5s of 2042, traded at 1.47%, richer by six basis points.

Municipals strengthened on the long end Thursday, according to readings on Refinitiv MMD’s AAA benchmark scale.

MMD reported yields on the 2021 and 2023 GO munis were unchanged at 0.13% and 0.15%, respectively. The yield on the 10-year GO muni dipped one basis point to 0.72% while the 30-year yield fell two basis points to 1.43%.

The 10-year muni-to-Treasury ratio was calculated at 122.0% while the 30-year muni-to-Treasury ratio stood at 114.6%, according to MMD.

The ICE AAA municipal yield curve showed short yields flat at 0.120% in 2021 and 0.129% in 2022. The 10-year maturity dropped one basis point to 0.685% and the 30-year was steady at 1.453%.

ICE reported the 10-year muni-to-Treasury ratio stood at 126% while the 30-year ratio was at 114%.

The IHS Markit municipal analytics AAA curve showed the 2021 maturity yielding 0.13% and the 2022 maturity at 0.16% while the 10-year muni was at 0.69% and the 30-year stood at 1.43%.

Munis were little changed on the MBIS benchmark and AAA scales.

Treasuries were stronger as stock prices traded down.

The three-month Treasury note was yielding 0.115%, the 10-year Treasury was yielding 0.579% and the 30-year Treasury was yielding 1.250%.

The Dow rose 0.32%, the S&P 500 increased 0.27% and the Nasdaq fell 0.08%.

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Primary bond market Secondary bond market Municipal bond funds State of Texas Dallas Fort Worth International Airport Board City of Dallas, TX City of Fort Worth, TX