Municipal bonds kept an even keel on Wednesday, even as a boatload of new issues hit the primary market, including several deals upwards of $100 million as well as more than 50 smaller transactions. Muni bond yields ended unchanged to slightly weaker.
Traders said the new offerings were priced attractively and would move off the shelves quickly.
Market participants say next week's holiday-shortened trading week is seen as a big factor in the new deals being priced to move.
"After this week, there's very little supply," a trader in Texas said. "There will be only a little window of opportunity for new deals to be priced after Thanksgiving and before the end of the year."
While the Thanksgiving holiday will keep market activity at near comatose levels next week, some observers see some optimism for November.
"This month is shaping up to be a strong new issue month approaching $30 billion, well ahead of last November's $23 billion pace," Janney Capital Markets said in its latest fixed-income strategy and research report.
Primary
Two separate issues from Virginia totaling about $385 million came to market along with a $377 million deal from a Texas issuer.
JPMorgan Securities won the $272.87 million Virginia Transportation Board transportation capital project revenue bonds with a true interest cost of 3.3812%. The bonds were priced to yield from 0.11% with a 2% coupon in 2015 to 3.70% with a 4% coupon in 2039. The issue is rated Aa1 by Moody's Investors Service and AA-plus by Standard & Poor's and Fitch Ratings.
Rice Financial Products priced the Virginia Small Business Financing Authority $111.555 million refunding revenue bonds to yield from 0.59% with a 3% coupon in 2015 to 4.22% with a 4% coupon in 2038. The bonds, issued for Hampton University, are rated A-minus by S&P.
The Dallas Area Rapid Transit District $377.77 million transit bonds were priced by JPMorgan. The bonds were priced to yield from 0.75% with a 3% coupon in 2017 out to split 2036 maturities which carry a 4% coupon to yield 3.55% and a 5% coupon to yield 3.24%. The bonds are rated Aa2 by Moody's and AA-plus by S&P.
Secondary
In other negotiated action, Wells Fargo Securities priced $401.475 million Baltimore, Md., issue for institutions in six series. A one-day retail order period was held on Tuesday.
The issue consists of $99.235 million subordinate project revenue bonds for water projects, Series 2014A, rated Aa3 by Moody's and AA-minus by S&P; $39.37 million refunding revenue bonds for water projects, Series 2014B, rated Aa2 by Moody's and AA by S&P; $36.07 million subordinate refunding revenue bonds for water projects, Series 2014C rated Aa3 by Moody's and AA-minus by S&P; $87.87 million subordinate Project revenue bonds, wastewater projects, Series 2014C, rated Aa3 by Moody's and AA-minus by S&P; $116.135 million refunding revenue bonds for wastewater projects, Series 2014D, rated Aa2 by Moody's and AA by S&P; and $22.795 million subordinate refunding revenue bonds for wastewater projects, rated Aa3 by Moody's and AA-minus by S&P.
The top yield was 3.55% with a 5% coupon for the 2044 maturities in Series 2014A and Series 2014C.
Municipal bond yields closed flat on the short and long end of the scale and slightly weaker at midrange. The benchmark 10-year GO yield fell two basis points to 2.18% while the 30-year GO was unchanged at 3.10%, according to the final read of Municipal Market Data's triple-A scale.
"The market's at pretty much the same levels," said a trader in Texas.
On Wednesday, the muni to Treasury ratio declined. The 10-year muni to Treasury ratio fell to 92.8% from 94.8% on Tuesday and 93.6% on Monday, while and the 30-year muni to Treasury ratio slipped to 101.1% from 101.6% on Tuesday and from 101% on Monday. The ratio is calculated by taking the yield on a triple-A rated muni and comparing it to the yield on a Treasury of the same maturity. The higher the ratio, the more attractive munis are to Treasuries.
In the past month, "Muni to Treasury ratios are up about 10% in the 10-year area, which given falling supply, represents a good entry point," according to Janney.
Treasuries were mixed, with the two-year note yield off one basis point to 0.53% from Tuesday's market close, while the 10-year was unchanged at 2.32% and the 30-year lost one basis point to 3.05%.
