Prices of top-rated municipal bonds moved lower for a third day, traders said, as yields on some bonds closed as much as five basis points higher on Wednesday.
More new issue supply came to market on Wednesday even as the $1 billion tax-exempt bond deal from the Trinity Health Credit Group was put off and placed on the day-to-day calendar.
Secondary Market
Prices of top-quality municipal bonds ended lower along with Treasuries.
The yield on the muni 10-year benchmark general obligation rose four basis points to 1.84% on Wednesday from 1.80% on Tuesday, while the yield on 30-year GOs increased five basis points to 2.64% from 2.59%, according to a final read of Municipal Market Data's triple-A scale.
Since Monday, yields on the 10-year have risen by 10 basis points as yields on the 30-year have risen by 14 basis points, reversing a month-long January trend that took yields down to near record lows. The 10-year muni hit an all-time low of 1.47% in 2012, while the 30-year muni's all-time low of 2.47% was also set in 2012.
Treasury prices also dropped on Wednesday. The two-year note yield rose to 0.51% from 0.50% on Tuesday; the 10-year yield increased to 1.79% from 1.77%, while the 30-year yield rose to 2.38% from 2.36%.
The 10-year muni to Treasury ratio increased to 102.8% on Wednesday from 101.1% on Tuesday, while the 30-year muni to Treasury ratio rose to 110.9% from 109.3%.
Primary Market
Trinity Health pushed back the planned sale of $1.1 billion of hospital revenue bonds amid this week's rising yields and shifted it to the day-to-day calendar until the market stabilizes. The borrowing was to be one of the largest to hit the market this week.
The Michigan-based provider was set to price $1.1 billion of tax-exempt bonds Feb. 3 and the $350 million taxable bonds on Feb. 5 or 6. The team decided to shift the tax-exempt piece to the day-to-day calendar Tuesday as borrowing rates rose.
The taxable piece could still sell as early as Thursday, according to Mark Melio of Melio & Co., Trinity's financial advisor. "We decided we didn't want to price into a market that was dislocated and trading away from us," he said. "The quality of the credit for Trinity wasn't being reflected in the credit spreads."
The finance team originally expected to see a 50 to 65-point basis point spread to the MMD, Melio said. As of Tuesday, that expected spread rose another 25 basis points.
One participant was taken off-guard by the postponement.
"Trinity, that's a well-known name," said a Midwest trader. "I was a little bit surprised when I heard they pulled the deal."
Meanwhile, Mississippi came to market with almost $713 million of bonds in four separate deals. All the bonds were rated Aa2 by Moody's Investors Service, AA by Standard & Poor's and AA-plus by Fitch Ratings.
Raymond James priced Mississippi's $154.685 million tax-exempt Series 2015A general obligation bond issue. The issue was priced to yield from 2.33% with a 5% coupon in 2026 to 3.15% with a 4% coupon in 2035.
Bank of America Merrill Lynch priced the state's $128.95 million Series 2015B taxable GOs. The bonds were priced at par to yield from 0.28% in 2015 to 2.979% in 2026.
J.P. Morgan Securities priced the state's $249.98 million Series 2015C refunding GOs. The bonds were priced to yield from 0.86% with a 5% coupon in 2018 to 2.69% with a 4% coupon in 2028.
RBC Capital Markets priced the state's $179.135 million Series 2015D taxable refunding GOs. The bonds were priced at par to yield from 0.31% in 2015 to 3.729% in 2032.
JPMorgan priced the Iowa Finance Authority's $323.46 million of State Revolving Fund revenue bonds. The bonds were priced to yield from 0.36% with a 4% coupon in 2016 to 2.68% with a 5% coupon in 2035; a 2015 maturity was offered as a sealed bid. The issue is rated triple-A by Moody's, S&P and Fitch. The SRF bonds are designated as "Green Bonds," since the proceeds will be used to finance projects that adhere to the federal Clean Water Act and Safe Drinking Water Act.
Citigroup Global Markets priced Oregon's $151.185 million GO refunding bonds for higher education purposes. The $81.965 million Series A bonds were priced to yield from 0.72% with a 5% coupon in 2018 to 2.62% with a 5% coupon in 2038. The $69.22 million Series B bonds were priced to yield from 0.72% with a 3% coupon in 2018 to 2.62% with a 5% coupon in 2038. The issue is rated Aa1 by Moody's and AA-plus by S&P and Fitch.
JPMorgan priced the Indiana Finance Authority's $158.775 million first lien wastewater utility revenue bonds for the CWA Authority Project. The bonds were priced to yield from 0.46% with a 3% coupon in 2016 to 3% with a 5% coupon in 2035; a 2040 term bond was priced as 5s to yield 3.07 and a 2045 term was priced as 5s to yield 3.12%. The issue is rated AA by S&P and A by Fitch.
MSRB Reports Previous Session's Activity
The Municipal Securities Rulemaking Board reported 36,590 trades on Tuesday on volume of $7.186 billion. Most active on Tuesday, based on the number of trades, was the Tulare Local HealthCare District, Calif., taxable Series 2005B Build America Bonds of Sept. 10, 2009, 7.95s of 2035, which traded 108 times with an average price of 109.396 and an average yield of 5.559%.
