The municipal bond market is in wait-and-see mode ahead of the Federal Open Market Committee’s statement on monetary policy.
After this afternoon’s monetary policy news release, the Fed will issue a summary of its economic projections, which will be followed by a press conference with Chair Janet Yellen.
Market participants have been speculating about what stance the Fed would take on interest rates.
“Focus has been on whether the word patient’ will be taken out and what it will be replaced with,” according to a recent comment from Municipal Market Data. “In our view, it will be taken out, but replaced by language emphasizing that the change does not suggest a shift in their policy outlook and that they can move at any time, with the implication being that it does not necessarily mean a June liftoff.”
Meanwhile, the last of the big new issues are set to be priced after more than $3 billion of supply came to market on Tuesday.
Secondary Market
Treasury prices were mostly higher on Wednesday. The yield on the two-year Treasury note was flat at 0.66% on Tuesday, while the 10-year yield decreased to 2.02% from 2.06% and the 30-year yield dropped to 2.57% from 2.62%.
Prices of top-quality municipal bonds ended stronger on Tuesday. The yield on the 10-year benchmark muni general obligation dropped three basis points to 2.09% from 2.12% on Monday, while the yield on 30-year GO declined three basis points to 2.90% from 2.93%, according to the final read of Municipal Market Data's triple-A scale.
On Tuesday, the 10-year muni to Treasury ratio was calculated at 101.7% versus 101.0% on Monday, while the 30-year muni to Treasury ratio stood at 110.9% compared to 109.2%.
Primary Market
Late on Tuesday, Citigroup Global Markets received the official award on the state of Oregon's $253.58 million of general obligation bonds, issued under Article XI-Q for state projects.
The Beaver State bonds were priced in three series following a retail order period Monday. The $171.595 Series F bonds were priced as to yield from 0.193% with a 2% coupon in 2016 to 2.94% with a 5% coupon in 2035; a 2039 term bond was priced as 5s to yield 3.02%. The $72.86 million Series H refunding bonds were priced to yield from 1.45% with a 5% coupon in 2020 to 2.46% with a 5% coupon in 2027. The $9.125 million Series I refunding bonds were priced to yield from 1.56% with a 3% coupon in 2020 to 2.51% with a 5% coupon in 2027.
The deal is rated Aa1 by Moody's Investors Service and AA-plus by both Standard & Poor’s and Fitch Ratings.
Citi also priced the North Carolina Medical Care Commission’s $297.1 million of Series 2015 health care facilities revenue bonds for Vidant Health. The issue is rated A1 by Moody’s and A-plus by S&P.
Also on Tuesday, Bank of America Merrill Lynch priced Honolulu, Hawaii’s $871.53 million of 2015 Series A through D tax-exempt general obligation bonds. The bonds are rated Aa1 by Moody’s Investors Service and AA-plus by Fitch Ratings.
Goldman, Sachs priced the Illinois Finance Authority's $288.31 million of Series 2015C revenue refunding bonds for the Silver Cross Hospital and Medical Center. The bonds are rated Baa1 by Moody’s and BBB-plus by Fitch. Goldman also priced the Kentucky Municipal Power Agency’s $210.62 million Series 2015A power system revenue refunding bonds for the Prairie State Project. The issue is insured by the National Public Finance Guarantee Corp. and rated A3 by Moody’s (Baa1 underlying) and AA-minus by S&P (A-minus underlying).
Morgan Stanley priced the Oklahoma Development Finance Authority’s $201.04 million of health system revenue refunding bonds for the Integris Obligated Group. The deal is rated Aa3 by Moody’s and AA-minus by S&P. Morgan also priced the Palomar Community College District, Calif.’s $220 million of Election of 2006 Series C GOs. The issue is rated AA2 by Moody’s and AA-minus by S&P.
The Board of Regents of the Texas Tech University System came with two issues on Tuesday. Wells Fargo Securities priced the Board’s $245.33 million of Series 2015B 17th Series taxable revenue financing system refunding and improvement bonds Series B and B2. Citi priced the Board’s $72.41 million of Series 2015A 16th Series revenue financing system refunding and improvement bonds. All bonds are rated Aa1 by Moody’s, AA by S&P and AA-plus by Fitch.
Bond Buyer Visible Supply
The Bond Buyer's 30-day visible supply calendar decreased $2.082 billion to $8.571 billion on Wednesday. The total is comprised of $2.852 billion competitive sales and $5.720 billion of negotiated deals.
MSRB Previous Session's Activity
The Municipal Securities Rulemaking Board reported 39,100 trades on Tuesday on volume of $9.451 billion.
Most active on Tuesday, based on the number of trades, was the North Carolina Medical Care Commission Series 2015 healthcare facilities revenue bonds for Vidant Health 4s of 2034, which traded 335 times at an average price of 99.992 with an average yield of 4.0%; (initial offering price of 100.00 and an initial offering yield of yield of 4.0%).
