The municipal bond market saw the week's new issuance calendar kick off with big deals coming to market from the New York City Transitional Finance Authority and King County, Wash.
Prices of top-quality municipal bonds finished out the day stronger, traders said, as yields slipped.
Primary Market
Ramirez & Co. priced the New York City TFA's $750 million of building aid revenue bonds for retail investors. The bonds were priced to yield from 0.66% with a 4% coupon in 2017 to 2.87% with a 5% coupon in 2025; a 2044 split term was priced as 4s to yield 3.36% in 2044, while the other portion wasn't offered for retail. The 2016 maturity was offered as a sealed bid. No retail orders were taken in the 2028-31, 2033-34, 2036-37 or 2040 maturities.
The issue has a second day of orders for mom and pop investors on Tuesday before being priced for institutions on Wednesday. The bonds are rated Aa2 by Moody's Investors Service and AA by Standard & Poor's and Fitch Ratings.
JPMorgan Securities on Monday priced King County, Wash.'s $742.545 million of sewer revenue refunding and limited tax general obligation refunding bonds for institutions after a one-day retail order period on Friday.
The $486.89 million sewer revenue part was priced to yield from 0.39% with a 3% coupon in 2016 to 2.92% with a 5% coupon in 2038; a 2040 split term was priced as 3 1/2s to yield 3.51% and as 5s to yield 2.96%; a 2044 term was priced as 4s to yield 3.41% and a 2047 term was priced as 5s to yield 3.07%. The sewers are rated Aa2 by Moody's and AA-plus by S&P.
The $255.655 million of GOs, which are payable from sewer revenues, were priced to yield from 0.36% with a 2% coupon in 2016 to 3.27% with a 4% coupon in 2038. The GOs are rated Aa1 by Moody's and AAA by S&P.
Some of the other large offerings on tap this week are a $502 million Illinois Finance Authority revenue bond sale for Chicago's Rush University Medical Center Obligation Group to be priced by Goldman, Sachs on Thursday; a $400 million sale from the N.Y. Metropolitan Transportation Authority to be priced by JPMorgan on Thursday; a $400 million taxable "Corporate Cusip" bond deal to be priced by Wells Fargo Securities on Wednesday for the University of Notre Dame Du Lac in Indiana; and the Oregon Department of Transportation's $378.96 million of highway user tax revenue bonds and senior lien refunding bonds to be priced by Morgan Stanley.
The largest competitive sale is the Orange County Sanitation District, Calif.'s $131 million of wastewater refunding obligations, going out for bid on Tuesday.
Secondary Market
Prices of top-quality municipal bonds resumed their upward climb on Monday.
The yield on the benchmark 10-year general obligation declined four basis points to 1.84% from Friday, while the yield on 30-year GOs was also four basis points lower at 2.63%, according to the final read of Municipal Market Data's triple-A scale.
Treasury prices were higher on Monday, with the two-year note yield falling to 0.55% from 0.58% on Friday. The 10-year yield dropped to 1.91% from 1.97%, while the 30-year yield declined to 2.49% from 2.56%.
On Monday, the 10-year muni to Treasury ratio was at 96.3%, compared with 95.6% on Friday, while the 30-year muni to Treasury ratio was at 105.6% versus 104.6%.
MSRB Reports Previous Session's Activity
The Municipal Securities Rulemaking Board reported 31,273 trades on Friday on volume of $8.785 billion. Most active on Friday, based on the number of trades, was the New Jersey Transportation Trust Fund Authority transportation program bonds, Series AA 4 1/4s of 2044, which traded 154 times with an average price of 102.669 and an average yield of 3.909%.
BlackRock: Munis Go 12 for 12 in 14
The municipal bond market opened 2015 with "perfect year momentum," according to a recent report from BlackRock, meaning that the market went "12 for 12" in 2014 -- posting positive performance in each month of the year.
"Issuance was very strong in December, as was demand, both defying typical patterns and pointing to continued strong momentum," according to the report.
And while 2015 won't look like 2014, BlackRock sees little reason for big changes.
"Our strategy is to maintain a barbell approach, holding very short maturities for liquidity and longer maturities for yield pick-up and to benefit from a flattening yield curve," BlackRock said. "We see greatest value in lower-rated investment-grade securities."
BlackRock added that given the precipitous fall in oil prices, the firm is monitoring the economies of those states that rely heavily on oil production.
