Deals are few and far between in the primary around midday on Wednesday, as traders and other market participants are waiting on the Federal Open Market Committee's decision on monetary policy, which is expected to come at 2 pm.
Most observers think the Federal Reserve will leave interest rates unchanged when it announces its decision on Wednesday afternoon. But market participants will be watching Fed Chair Janet Yellen's press conference after the announcement for hints of future moves.
Munis were steady and traders said they think it will stay that way until after the announcement.
Secondary Trading
U.S. Treasuries were stronger at midday on Wednesday. The yield on the two-year Treasury decreased to 0.71% from 0.72% on Tuesday, while the 10-year Treasury yield was lower to 1.59% from 1.61% and the yield on the 30-year Treasury bond decreased to 2.40% from 2.42%.
Top quality municipal bonds finished stronger on Tuesday. The 30-year muni general obligation yield fell four basis points to a record low of 2.18% from 2.22%, according to the final read of Municipal Market Data's triple-A scale.
The yield on 10-year benchmark muni declined three basis points to 1.48% from 1.51% on Monday, according to MMD. The yield on 10-year muni now stands only one basis point above its all-time low of 1.47% set in 2012.
The 10-year muni to Treasury ratio was calculated at 91.9% on Tuesday compared to 93.5% on Monday, while the 30-year muni to Treasury ratio stood at 90.0% versus 91.3%, according to MMD.
Primary Market
In the competitive arena on Wednesday, Frederick County, Md., sold almost $125 million of GOs in two separate transactions: $90 million of Series 2016A GO public facilities bonds and $34.82 million of Series 2016B taxable GO public facilities refunding bonds. Citi won the larger sale with a true interest cost of 2.27%, while Raymond James won the other sale with a TIC of 2.53%. Both deals are rated triple-A by Moody's, S&P and Fitch.
The biggest deal of the week comes from the Land of Lincoln on Thursday. The state of Illinois is putting up for competitive bid $550 million of its Series 2016 general obligation bonds. The bonds are now rated Baa2 by Moody's Investors Service and BBB-plus by S&P Global Ratings and Fitch Ratings. All three raters have negative outlooks on the credit.
Illinois last competitively sold GOs on Jan. 14, when Bank of America Merrill Lynch won $480 million Series of January 2016 GOs with a true interest cost of 3.9989%. It was the state's first sale after a 20-month hiatus, and the proceeds were to be used mostly for transportation projects. That issue was priced with a top yield of 4.27% in 2041, which was 161 basis points over the comparable maturity on MMD's triple-A scale.
Since 2006, Illinois has issued about $27.5 billion of debt, with the largest issuance occurring in 2010 when it sold $8.7 billion of securities. The Prairie State has sold more than $1 billion a year every year since 2006, except in 2007, 2008 and 2015. After staying out of the market all last year, it looks as though the state is back on track to reach the $1 billion plateau once again this year.
Citigroup is set to price the Peralta Community College District of Alameda County, Calif.'s $155 million of general obligation bonds. The deal is rated Aa3 by Moody's and triple-A by S&P.
Also on Thursday, Bank of America Merrill Lynch is expected to price the Dutchess County Local Development Corp., N.Y.'s $378.01 million of Series 2016B revenue and revenue refunding bonds for Health Quest Systems. The deal consists of $28.01 million of Series 2016A revenue refunding bonds and $350 million of Series 2016B revenue bonds. The issue is rated A3 by Moody's and A-minus by S&P.
In the short-term competitive arena, the New York Metropolitan Transportation Authority is selling $700 million of bond anticipation notes in two separate sales on Thursday. The deals consist of $350 million of Series 2016A Subseries 2016A-1 dedicated tax BANs and $350 million of Series 2016A Subseries 2016A-2 dedicated tax BANs.
MSRB: Previous Session's Activity
The Municipal Securities Rulemaking Board reported 38,858 trades on Tuesday on volume of $14.497 billion.
Bond Buyer Visible Supply
The Bond Buyer's 30-day visible supply calendar decreased $2.59 billion to $10.20 billion on Wednesday. The total is comprised of $3.99 billion of competitive sales and $3.82 billion of negotiated deals.
