The municipal bond market welcomed the first of the week's new supply as issuers from New York and Florida came to market with several big deals.
Municipal bond yields fell substantially, according to traders, continuing a recent downward trend.
PRIMARY MARKET
Barclays Capital priced the Dormitory Authority of the State of New York's $1 billion general purpose state personal income tax revenue bonds for retail investors.
The DASNY bonds were priced for mom and pop investors to yield from 1.46% with a 5% coupon in 2020 to 2.35% with a 5% coupon in 2026. There were no retail orders taken in the 2027-2030 and 2032-2034 maturities. A 2031 split maturity was priced as 3s to yield 3.04% and as 5s to yield 2.69%; a 2035 split maturity was priced as 4s to yield 3.19% and as 5s to yield 2.89%; and a 2036 term was priced as 3 1/4s to yield 3.28%. A 2015 maturity was offered as a sealed bid.
The bonds are rated AAA by Standard & Poor's and AA-plus by Fitch Ratings.
In the competitive arena, Miami-Dade County, Fla., sold three separate sales of general obligation bonds totaling $398.745 million.
JPMorgan won Miami-Dade's $249.225 million GO refunding bonds for the Building Better Community Program with a true interest cost of 3.2319%.The bonds were priced to yield from 1.56% with a 5% coupon in 2020 to 3.29% with a 4% coupon in 2035.
Wells Fargo Securities won the $53.53 million GO refunding bonds for the Parks Program with a TIC of 2.6640%. The bonds were priced to yield from 1.62% with a 5% coupon in 2020 to about 3.162% with a 3% coupon in 2030.
Robert W. Baird won the $95.99 million GOs for the Public Health Trust program with a TIC of 3.4372%. No other information was available.
All three deals are rated Aa2 by Moody's Investors Service and AA by S&P.
On Wednesday, Citigroup is set to price the Broward County, Fla., School Board's $273 million certificates of participation. The COPs are rated A1 by Moody's, A by S&P and A-plus by Fitch.
On Thursday, Citi will price the Oregon state Department of Administrative Services' $412 million lottery revenue bonds. The bonds are rated Aa2 by Moody's and triple-A by S&P.
And Shelby County, Tenn., will sell a $172.6 million general obligation refunding bond issue in a competitive sale on Thursday. This deal is rated Aa1 by Moody's and AA-plus by both S&P and Fitch.
SECONDARY MARKET
Prices of top quality municipal bond were substantially stronger on Tuesday. The yield on the benchmark 10-year general obligation dropped seven basis points to 1.89% from 1.96% on Monday, while the yield on 30-year GOs declined 10 basis points to 2.67% from 2.77%, according to the final read of Municipal Market Data's triple-A scale.
Treasury prices were higher on Tuesday, with the two-year note yield dropping to 0.62% from 0.66% on Monday. The 10-year yield declined to 1.96% from 2.03%, while the 30-year yield decreased to 2.54% from 2.61%.
Some traders said munis are looking good to investors, pushing yields lower.
"You've got two factors with that, the main reason, or macro reason, is that rates in general are declining and the market is rallying with all that is going on globally, so munis are drifting higher," a New York trader said.
"The micro picture is that for the better part — and more specifically from the end of December — we were coming out of huge supply and it cheapened the market. Since it was the end of the year, the market couldn't take advantage, so there was no critical mass," he said. "Once the New Year came, munis became a cheap asset class and still are right now."
The 10-year muni to Treasury ratio was at 96.4% on Tuesday compared to 95.6% on Monday, while the 30-year muni to Treasury ratio was at 106.0% versus 106.4%.
PREVIOUS SESSION'S ACTIVITY
The Municipal Securities Rulemaking Board reported 41,713 trades on Monday on volume of $8.142 billion.
Most active on Monday, based on the number of trades, was the New Jersey Transportation Trust Fund Authority transportation program bonds, Series AA 4 1/4s of 2044, which traded 290 times with an average price of 101.393 and an average yield of 4.07%.
