More than $4.5 billion of new issues were priced on Wednesday, with issuers from Texas and Washington state leading the way. Yields on top-rated municipal bonds turned sharply higher, according to traders, with the longest-dated maturities rising by five basis points.
In the negotiated sector, Barclays Capital priced the biggest deal of the week - the Texas Transportation Commission for the Central Texas Turnpike System's $1.681 billion of revenue bonds. The deal was well received by investors, according to traders.
"The serials in the 15-year range were the most in demand, but overall everything was oversubscribed," a Texas trader said.
The $225 million first tier revenue refunding put bonds, Series 2015A, were priced as 5s to yield 1.62% in 2042. The bonds, which have a mandatory put maturity of 2020, are rated A3 by Moody's and A-minus by S&P; Fitch is expected to rate the bonds A-minus.
The $291.753 million of first tier revenue refunding bonds, Series 2015B, were priced as 5s to yield 3.02% in 2032 and as 5s to yield 3.17% in 2037 and priced as premium capital appreciation bonds to yield 4.36% in 2036 and 4.38% in 2037. The bonds are rated A3 by Moody's and A-minus by S&P; Fitch is expected to rate the bonds A-minus.
The $1.164 billion second tier revenue refunding bonds, Series 2015C, were priced to yield from 2.16% with a 5% coupon in 2022 to 3.43% with a 5% coupon in 2034; a 2037 term bond was priced as 5s to yield 3.46% and a 2042 term was priced as 5s to yield 3.51%. The bonds are rated Baa1 by Moody's and BBB-plus by S&P; Fitch is expected to rate the bonds BBB-plus.
"It looks like the market was waiting and anticipating this deal coming to market, one reason why it was so well received," the Texas trader said.
Primary Market
In the competitive arena, Washington state sold four separate deals of general obligation bonds totaling over $1 billion.
The $458.76 million various purpose GO refunding bonds were won by Bank of America Merrill Lynch with a true interest cost of 2.6686%. The Series R-2015E bonds were priced as 5s to yield 0.30% in 2015 and to yield from 0.81% with a 5% coupon in 2018 to 2.65% with a 5% coupon in 2033.
The $281.750 million of various purpose GOs were won by Morgan Stanley with a TIC of 3.3662%. The Series 2015B bonds were priced as serials to yield from 1.65% with a 5% coupon in 2022 to 2.84% with a 5% coupon in 2040.
The $200.63 million of vehicle fuel tax GOs were won by Bank of America Merrill Lynch with a TIC of 3.2649%. The Series 2015C bonds were priced as serials to yield from 0.15% with a 5% coupon in 2016 to 2.85% with a 5% coupon in 2040.
The $59.205 million of taxable GOs were won by Wells Fargo Securities with a TIC of 1.5819%. The Series 2015T-2 taxables were priced at par to yield from 0.30% (15 basis points over Treasuries) in 2016 to 2.19% (57 basis points over Treasuries) in 2022.
All four issues are rated Aa1 by Moody's Investors Service and AA-plus by both Standard & Poor's and Fitch Ratings.
In the negotiated sector, JPMorgan priced the East Bay Municipal Utility District, Calif.'s $442.055 million of water revenue bonds for retail investors. The bonds were priced to yield from 1.56% with a 4% coupon in 2023 to 2.18% with a 5% coupon in 2029; a 2035 maturity was priced as 5s to yield 2.46%. No retail orders were taken in the 2030-34 or 2036-37 maturities. The deal is rated Aa1 by Moody's, AAA by S&P and AA-plus by Fitch.
RBC Capital Markets priced the Michigan Finance Authority's $398.44 million of hospital revenue refunding bonds. The Series 2015A bonds were priced to yield from 0.73% with a 4% coupon in 2017 to 3.03% with a 5% coupon in 2033. The deal is rated A1 by Moody's and A by S&P.
JPMorgan priced $400 million of Connecticut Health and Educational Facilities Authority revenue bonds for Yale University. The $125 million Series T2 remarketing was prices at par to yield 0.60% in 2029. The $125 million Series X2 remarking was priced at par to yield 0.90% in 2037. The $150 million Series 2010A-4 bonds were priced at par to yield 1.20% in 2049. The issue is rated triple-A by Moody's and S&P.
Morgan Stanley priced the Alabama Federal Aid Highway Finance Authority's $533.18 million of special obligation revenue bonds. The bonds were priced to yield from 0.33% with a 3% coupon in 2016 to 2.99% with a 4% coupon in 2034. The issue is rated Aa1 by Moody's and AAA by S&P.
In the competitive arena, Morgan Stanley won the $111.935 million Horry County School District, S.C.'s GO refunding bonds with a TIC of 2.4999%. The bonds were priced as serials to yield from 0.29% with a 5% coupon in 2016 to 2.90% with a 3.5% coupon in 2031. The bonds are rated Aa1 by Moody's and AA by S&P.
Secondary Market
Prices of high-quality municipal bonds turned lower on Wednesday, traders said.
The yield on the 10-year benchmark general obligation increased four basis points to 1.80% from 1.76% on Tuesday, while the yield on 30-year GOs rose five basis points to 2.59% from 2.54%, according to the final read of MMD's triple-A benchmark scale.
Treasury prices were also lower on Wednesday, with the two-year note yield rising to 0.50% from 0.49% on Tuesday. The 10-year yield was up to 1.84% from 1.80%, while the 30-year yield rose to 2.42% from 2.40%.
The 10-year muni to Treasury ratio fell to 97.0% on Wednesday from 97.7% on Tuesday, while the 30-year muni to Treasury ratio slipped to 106.0% from 106.1%. The ratio is calculated by taking the yield on a triple-A rated muni and comparing it to the yield on a Treasury of a similar maturity. The higher the ratio, the more attractive tax-exempts are to Treasuries.
MSRB Reports Previous Session's Activity
The Municipal Securities Rulemaking Board reported 34,526 trades on Tuesday on volume of $6.110 billion. Most active on Tuesday, based on the number of trades, was the New Jersey Transportation Trust Fund Authority transportation program bond, Series AA 4 1/4s of 2044, which traded 78 times with an average price of 103.939 and an average yield of 3.748%.
