Municipal bonds were stronger on Tuesday as several large deals swept into the market.
A strong flow of demand followed a group of the morning’s largest competitive deals in Georgia totaling over $1 billion, as investors facing redemptions due to summer reinvestment snapped up a good portion of the bonds, observed a Charlotte municipal trader.
He said the four Georgia general obligation deals totaling a combined $1.23 billion were highly sought after as the municipal market remained firm amid a two to three basis-point cut in yield by Municipal Market Data Tuesday morning.
“It seems the market overall is firm today so far,” the North Carolina trader said. “The Georgia deals did pretty well; over half of the deal sold right away,” he added, noting that many investors are eager to fulfill upcoming July 1 redemptions with new paper.
He said roughly $300 million of the $430 million Georgia deal was put away instantly by winning underwriter Citigroup.
“With the supply still fairly muted and bonds getting called organically through maturities and coupons, there is a good amount of cash coming in to set up the new issue market,” he said.
The presence of new issues this week will benefit from good timing ahead of the summer redemptions and will help prompt investors out of hiding and into the market where others are finding value, the trader noted. "From what I can tell demand is mixed -- some are participating and some are on the sidelines.”
Georgia sold about $1.23 billion of general obligation bonds in four competitive sales.
Citigroup won the $428.96 million of Series 2018A Tranche 2 GOs with a true interest cost of 3.3143%.
Citi also won the $411.655 million of Series 2018A Tranche 1 GOs with a TIC of 2.1986%.
Details were not immediately available on thew winners of the $210.445 million of Series 2018B Tranche 1 taxable GOs or the $178.65 million of Series 2018B Tranche 2 taxable GOs.
The deals are rated triple-A by Moody’s Investors Service, S&P and Fitch Ratings. The financial advisors are Public Resources Advisory Group and Terminus Municipal Advisors; bond counsel is Gray Pannell.
Since 2008, the Peach State has issued about $15 billion of bonds with the most issuance occurring in 2009 when it sold $2.51 billion of securities. It sold the least amount of bonds in 2008, when it issued $522.5 million of debt.
Also on Tuesday, Morgan Stanley won the city and county of Denver, Colo.'s $193 million of Series 2018A elevate Denver GOs with a TIC of 2.8597%.
The deal is rated AAA by Fitch. Financial advisors are Hilltop Securities; bond counsel are Greenberg Traurig and Becker Stowe.
In the negotiated sector on Tuesday, underwriters circulated a new premarketing scale on the Golden State Tobacco Securitization Corp.’s $1.699 billion of Series 2018A-1 tobacco settlement asset-backed bonds consisting of serial bonds and turbo term bonds. Citi put out the first premarketing scale on Monday; the deal will be priced for institutions on Wednesday.
S&P Global Ratings assigned the bonds structured finance preliminary ratings as follows: BBB to the 2030 to 2035 serial maturities and a BBB-minus rating to the 2036 turbo term bonds. S&P did not rate the turbo term bonds due June 1, 2047.
The serial bonds were being premarketed as 5s to yield from 3.27% in 2030 to 3.49% in 2035.
The $250 million of turbo terms of 2036 were being premarketed at par to yield 3.625%.
The $1 billion of turbo terms of 2047 were split and being premarketed as $500 million of 5s to yield approximately 5.033% and as $500 million of 5 1/4s to yield 4.70%. The turbo 2036 bonds have an a projected average life of 3.75 years with an expected final turbo redemption of 2025 while the turbo 2047 bonds have an a projected average life of 20.88 years with an expected final turbo redemption of 2042.
Bank of America Merrill Lynch priced Massachusetts’ $225 million of Series 2018A rail enhancement and accelerated bridge programs commonwealth transportation find revenue bonds for retail investors ahead of the institutional pricing on Wednesday.
The deal is rated Aa1 by Moody’s and AAA by S&P and Kroll Bond Rating Agency.
Tuesday’s Bond sales
Click here for the $225M state retail deal
Bond Buyer 30-day visible supply at $8.73B
The Bond Buyer's 30-day visible supply calendar decreased $10.1 million to $8.72 billion on Tuesday. The total is comprised of $3.489 billion of competitive sales and $5.228 billion of negotiated deals.
Municipal bonds were stronger on Monday, according to a midday read of the MBIS benchmark scale. Benchmark muni yields fell as much as three basis points in the one- to 30-year maturities.
High-grade munis were also stronger, with yields calculated on MBIS’ AAA scale falling as much as two basis points across the curve.
Municipals were stronger on Municipal Market Data’s AAA benchmark scale, which showed yields weakening as much as two basis points in the 10-year muni general obligation and declining two to three basis points in the 30-year muni maturity.
Treasury bonds were stronger as stock prices declined.
On Monday, the 10-year muni-to-Treasury ratio was calculated at 84.9% while the 30-year muni-to-Treasury ratio stood at 98.0%, 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.
Previous session's activity
The Municipal Securities Rulemaking Board reported 40,209 trades on Monday on volume of $8.02 billion.
Texas, New York and California were the states with the most trades, with the Lone Star State taking 14.747% of the market, the Empire State taking 13.341% and the Golden State taking 13.037%.
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.