Institutional municipal bond investors on Wednesday gave a good reception to the New York City Transitional Finance Authority's bonds, allowing underwriters to slash yields on most maturities.
Meanwhile, prices of top-rated municipal bonds were stronger, according to traders, buttressed along with Treasuries by the release of a weak report on December retail sales.
Ramirez & Co. priced and repriced the TFA's $750 million of building aid revenue bonds for institutions after a two-day retail order period. Yields were lowered at the repricing and restructuring on most maturities, ranging from two to as much as seven basis points. The issue now yields from 0.24% with a 5% coupon in 2016 to 2.86% with a 5% coupon in 2037. A 2040 term bond was priced as 5s to yield 2.89%; a 2043 term was priced as 5s to yield 2.93%; and a 2044 term was priced as 4s to yield 3.25%.
"The TFA received approximately $1.7 billion of priority orders from institutional investors on the approximately $579 million of bonds offered to institutions," the authority said in a press release. "At the final pricing, strong investor demand made it possible to reduce yields by up to seven basis points in 21 maturities."
The BARBs were tentatively priced for institutions on Wednesday with a top yield of 3.31% in 2044.
On Tuesday, the issue was priced for retail investors with a top yield of 3.32% in 2044 and priced on Monday with a top yield of 3.36% in 2044. The TFA said it received about $354 million of retail orders for the bonds.
The issue is rated Aa2 by Moody's Investors Service and AA by Standard & Poor's and Fitch Ratings.
Primary Market
Morgan Stanley priced the Oregon Department of Transportation's $383.15 million of highway user tax revenue senior lien refunding bonds. The issue was priced to yield from 1.08% with a 4% coupon in 2019 to 2.79% with a 4% coupon in 2033. The bonds are rated Aa1 by Moody's, triple-A by S&P and AA-plus by Fitch.
Morgan Stanley priced two general obligation bond issues totaling $119.95 million for the state of Texas Water Development Board's Economically Distressed Areas Program. All the bonds were rated triple-A by Moody's, S&P and Fitch.
The Texas WDB's $77.35 million of taxable GO water financial assistance refunding bonds were priced in three series. The $44.645 million of Series B1 taxables were priced to yield from 0.165% with a 3% coupon in 2015 to 3.576% with coupon of 3.576% in 2034; a 2043 term was priced at par to yield 3.726%. The $25.34 million Series B2 taxables were priced at par to yield 1.902% as a bullet maturity of 2023. The $7.365 million Series C1 taxables were priced at par to yield from 0.18% in 2015 to 2.571% in 2023.
The Texas WDB's $42.595 million tax-exempt GO water financial assistance refunding bonds were priced in three series. The $6.435 million Series A1 bonds were priced to yield from 0.15% with a 2% coupon in 2015 to 0.69% with a 4% coupon in 2017. The $26.61 million Series A2 bonds were priced to yield 1.07% with a 2% coupon in a bullet maturity of 2018. The $9.55 million Series C2 bonds were priced to yield from 0.30% with a 3% coupon in 2015 to 2.72% with a 4% coupon in 2029.
Secondary Market
Prices of top-quality municipal bonds were significantly stronger on Wednesday. The yield on the benchmark 10-year general obligation fell six basis points to 1.78% from 1.84% on Tuesday, while the yield on 30-year GOs dropped eight basis points to 2.54% from 2.62%, according to the final read of Municipal Market Data's triple-A scale.
Treasury prices were also higher on Wednesday, with the two-year note yield falling to 0.49% from 0.53% on Tuesday. The 10-year yield dropped to 1.84% from 1.89%, while the 30-year yield declined to 2.45% from 2.48%.
On Wednesday, the 10-year muni to Treasury ratio was at 96.7% compared to 97.6% on Tuesday, while the 30-year muni to Treasury ratio was at 103.5% versus 105.7%.
MSRB Reports Previous Session's Activity
The Municipal Securities Rulemaking Board reported 37,130 trades on Tuesday on volume of $9.921 billion. Most active on Tuesday, based on the number of trades, was the Savannah, Ga., Economic Development Authority's Savannah ALF LLC first mortgage revenue bond 7 1/4s of 01/2045, which traded 213 times with an average price of 100.00 and an average yield of 7.25%.
Tax-Exempt Money Market Funds See Outflows
Tax-exempt money market funds had an outflow of $1.463 billion, bringing their total net assets to $263.194 billion in the week ended Jan. 13, according to The Money Fund Report, a service of iMoneyNet.com. The funds saw $4.371 billion of inflows in the previous week.
The average seven-day yield for the 396 weekly reporting tax-exempt money funds held steady at 0.1%, while the average maturity decreased by one day to 35 days compared to the previous week.
RBC Looks at Bond Fund Inflows
A new report from RBC Capital markets takes a look at the latest surge of inflows into municipal bond funds.
Last week, Lipper reported that muni bond funds posted net inflows of $1.34 billion for the week ended Jan. 7, a dramatic turnaround from the $9 million in net outflows reported for the last week of 2014.
"The big Jan. 1 coupon payment no doubt played a large role in producing such sizable inflows, as all of the municipal subsectors were in the black last week," Chris Mauro, head of US Municipals Strategy at RBC, writes in the report, noting the leadership provided by long muni bond funds.
"Long bond (ex-high yield) funds took in just over $485 million, the best such flow into this category since Jan. 9, 2013," he writes. "The high yield muni subsector had its best week in almost three months with $336 million in net inflows reported. Intermediate and short funds saw net inflows of $248 million and $269 million, respectively."
