NEW YORK – The municipal market was unchanged with a slightly weaker tone Monday amid light to moderate secondary trading activity.
“We’re mostly flat,” a trader in Los Angeles said. “There’s still a bit of a weaker tone, and we might be down a basis point in spots, but there wasn’t a whole lot of activity in the secondary and we were just pretty flat through most of the curve.”
The Municipal Market Data triple-A scale yielded 2.42% in 10 years and 3.33% in 20 years Monday, matching Friday. The scale yielded 3.72% in 30 years Monday, also matching Friday.
Monday’s flatness ended a string of seven consecutive sessions of rising yields, after just one such sell-off the entire month of August.
Before the recent sell-off, yields dropped to all-time lows in 10-year munis 12 times in the prior 17 sessions. Also, 30-year tax-exempts set record lows four times in the previous eight sessions, while 20-year munis established all-time lows five times over the same time period.
The record lows currently stand at 2.17% and 3.67% in 10- and 30-year tax-exempts, both established August 25. The 20-year low of 3.28% was set August 31.
Friday’s triple-A muni scale in 10 years was at 86.7% of comparable Treasuries and 30-year munis were at 96.1%, according to MMD, while 30-year tax-exempt triple-A general obligation bonds were at 106.3% of the comparable London Interbank Offered Rate.
The Treasury market was showed gains Monday. The benchmark 10-year note was quoted at 2.74% after opening at 2.79%.
The 30-year bond was quoted at 3.84% after opening at 3.86%. The two-year note was quoted at 0.54% after opening at 0.57%.
Three sizable Ohio deals, a large New York City utility financing, and a two-pronged Texas education sale greet investors as part of an estimated $6.72 billion of new issues in the first full week of trading and underwriting after the late summer holidays, according to Ipreo LLC and The Bond Buyer.
The volume is a welcome arrival on the heels of a revised $2.64 billion last week, according to Thomson Reuters.
The Midwest trio of deals will be led by a $741 million sale of general receipt bonds from the Ohio State University, which includes around $655 million of Build America Bonds with a 30-year bullet maturity in 2040 and $86 million of tax-exempt refunding debt maturing serially in the next 15 to 20 years.
The precedent-setting deal is the largest bond offering in the Big 10 university's history, and also marks its first offering of a bullet maturity, according to school officials. The BAB portion is planned for pricing by joint book-runners Morgan Stanley and Barclays Capital on Wednesday, following a retail order period expected on Tuesday. Morgan is the sole book-runner on the tax-exempt series.
The bonds are rated Aa1 by Moody's Investors Services and AA-minus by Standard & Poor's and Fitch Ratings.
The Ohio Water Development Authority will add to the activity this week as it prepares to sell two separate offerings. The largest consists of $225 million of water pollution-control loan fund refunding revenue bonds structured as Series 2010C debt maturing serially from 2017 to 2025. They are being priced Thursday by JPMorgan.
The second sale is a $155 million offering of Series 2010A water development revenue bonds being priced by Barclays on Tuesday and secured by pledged revenues.
About $146.8 million of taxable, direct-pay BABs are structured as term bonds in each year from 2020 to 2025, and in 2030 and 2042, while another $7.1 million of tax-exempt securities are structured to mature from 2010 to 2012, according to the preliminary official statement.
Both of the authority's deals are rated triple-A by Moody's and Standard & Poor's.
In the Northeast market, the New York City Municipal Finance Authority is on tap to issue $600 million of Fiscal Series 2011 AA water and sewer system second general resolution revenue bonds, secured by a pledge of and subordinate lien on the gross revenues of the system, according to the POS.
The negotiated deal, which is designated as taxable, direct-pay BABs, is planned for pricing on Thursday. Barclays and Jefferies & Co. will be book-running senior managers, leading a syndicate of nearly two dozen underwriting firms.
The bonds are expected to be rated Aa2 by Moody's and AA-plus by Standard & Poor's and Fitch. The exact structure of the deal was not available by press time.
The University of Texas Board of Regents will issue a two-pronged offering of direct-pay revenue financing system bonds totaling $630.7 million.
The largest portion of the deal is the $543.6 million in Series 2010C, which will consist of the BABs, while Series 2010E totals $87.1 million and consists of tax-exempts.
The deal is planned for pricing on Tuesday by JPMorgan and will be sold with triple-A ratings from the big three rating agencies.
In the competitive market, Washington will bring over $600 million of state GO refunding debt to market Wednesday.
The two-pronged sale is structured as $325.36 million of Series R 2011C motor vehicle fuel-tax refunding bonds and $313.3 million of Series R 2011B various-purpose refunding GOs.
Both series are structured to mature from 2011 to 2027, though Series R 2011-B does not have a 2012 maturity, the POS said.
In the new-issue market Monday, Estrada Hinojosa & Co. priced $104.1 million of unlimited tax school building bonds for Texas’ Pharr-San Juan-Alamo Independent School District.
The bonds mature from 2011 through 2030, with term bonds in 2035 and 2040. Yields range from 0.59% with a 3% coupon in 2012 to 4.18% with a 4% coupon in 2040. Bonds maturing in 2011 were decided via sealed bid.
The bonds, which are callable at par in 2020, are backed by the Permanent School Fund guarantee program. The underlying credit is rated Aa3 by Moody’s and A-plus by Standard & Poor’s.
The economic calendar was light Monday.
Visible Supply
The Bond Buyer’s 30-day visible supply rose $3.314 billion to $12.527 billion. The total is comprised of $2.904 billion of competitive bonds and $9.623 billion of negotiated bonds.
Previous Session's Activity
The Municipal Securities Rulemaking Board reported 31,299 trades of 12,589 issues for volume of $8.76 billion. Most active was Oklahoma’s Caddo County Governmental Building Authority 6.758s of 2040 that traded 274 times at a high of 103.500 and a low of 100.400.
