Prices on top-shelf municipal bonds opened slightly weaker Friday, with yields on some maturities as much as one basis point higher.
The primary market has seen all of the large issues priced, including two $2 billion deals.
Secondary Trading
Treasury prices were narrowly mixed on Friday morning, with the yield on the two-year Treasury increasing to 0.64% from 0.63% from Thursday, while the 10-year yield rose to 2.11% from 2.10% and the 30-year yield stayed flat at 2.95%.
The yield on the 10-year benchmark muni general obligation closed Thursday at 2.04% from 2.02% on Wednesday, while the 30-year GO was two basis points higher to 3.09% from 3.07%, according to a final read of the Municipal Market Data's triple-A scale.
An early morning read of the scale, indicates that the yield 10-year is steady from Thursday’s close, while the yield on the 30-year is as much as one basis point higher.
The 10-year muni to Treasury ratio was calculated on Thursday at 97.0% versus 98.1% on Wednesday, while the 30-year muni to Treasury ratio stood at 105.1% compared to 106.4%, according to MMD.
The Week’s Primary Market
The market was headlined by Chicago’s O’Hare International Airport’s almost $2 billion sale, which was so well received that orders were cut off after about an hour, according to traders and other market participants.
JPMorgan on Wednesday priced and then re-priced O’Hare’s $1.954 billion of general airport senior lien revenue and refunding bonds, in four series.
The $429.39 million of alternative minimum tax, Series 2015A bonds were priced as 2s to yield 0.19% in 2016 and as 5s to yield 1.50% in 2019. The bonds were also priced to yield from 2.75% with a 5% coupon in 2023 to 4.39% with a 4.125% coupon in 2037.
The $1.196 billion of non-AMT series 2015B bonds were priced as 4s to yield 0.18% in 2016 and to yield from 1.32% with a 5% coupon in 2019 to 3.75% with a 5% coupon in 2035.
The $194.72 million of AMT Series 2015C bonds were priced to yield from 2.18% with a 5% coupon in 2021 to 4.05% with a 5% coupon in 2035. A 2040 term bond was priced to yield 4.54% with a 4.375% coupon and a term bond in 2046 was priced to yield 4.23% with a 5% coupon.
The $134.26 million of non-AMT Series 2015D bonds were priced to yield from 1.85% with a 5% coupon in 2021 to 4% priced at par in 2032. A 2035 term bond was priced as 4s to yield 4.05%, a 2040 term bond was priced as 4.25s to yield 4.24% and a 2046 term bond was priced as 5s to yield 3.90%. The deal is rated A by Standard and Poor’s, A-minus by Fitch Ratings and A-plus by Kroll Bond Rating Agency.
“There was a lot of talk leading up to this deal about Chicago and how the city would or could taint the deal,” said a Midwest trader. “But there were a lot of savvy institutions who smartly looked through that on this credit and bought it up and got a nice price on it. The city did a nice job marketing it.”
On Thursday, Wells Fargo Securities priced the other mega deal of the week: Port Authority of New York and New Jersey’s revenue bonds for institutions, after a one-day retail order period on Wednesday.
The $305.530 million of AMT 193rd Series bonds were priced to yield from 0.29% with a 1.5% coupon in 2016 to 3.48% with a 5% coupon in 2035.
The $1.194 billion of non-AMT 194th Series bonds were priced to yield from 0.24% with a 1.5% coupon in 2016 to 3.17% with a 5% coupon in 2035. A term bond in 2041 was priced as 5s to yield 3.40%, a term bond in 2045 was priced as 4s to yield 3.85% and a 2055 term bond was priced as 5 1/4s to yield 3.69%.
The $500 million taxable portion of the deal was priced as a bullet maturity in 2065 with a 3% coupon and is priced 190 basis points above the comparable Treasury.
Citi on Tuesday priced Texas Water Development Board's $795.62 million of state water implementation revenue bonds, which is comprised of $783.64 million Series 2015 A Master Trust and $11.98 million of Series B taxable bonds. The Series A bonds were priced to yield from 0.23% with a 2% coupon in 2016 to 3.46% with a 4% coupon in 2035. A 2040 term bond was priced as 4s and as 5s in a split maturity to yield 3.66% and 3.26%, respectively. A 2045 term bond was priced as 4s and as 5s in a split maturity to yield 3.73% and 3.33%, respectively. A term bond in 2050 was priced as 4s to yield 3.85%.
The $11.98 million of taxable series b bonds were priced at par to yield from 0.45% in 2016 to 3.053% in 2025. The term bonds were also priced at par in 2030, 2035 and 2050, to yield 3.703%, 4.248% and 4.648%. The deal is rated triple-A by both S&P and Fitch Ratings.
Bank of America Merrill Lynch priced the District of Columbia Water and Sewer Authority's $350 million of public utility subordinate lien revenue bonds and green bonds, after a retail order period on Monday. The $100 million series 2015A green bonds were priced to yield from 0.87% with a 3% coupon in 2018 to 2.56% with a 5% coupon in 2027. A 2045 term bond was priced as 4s and as 5s to yield 3.75% and 3.50% in a split maturity.
The $250 million of Series 2015B were priced to yield from 2.70% with a 5% coupon in 2028 to 3.28% with a 5% coupon in 2037. A 2040 term bond was priced to yield 3.36% with a 5.25% coupon. A 2044 term bond was priced to yield 3.42% with a 5.25% coupon. The deal is rated Aa3 by Moody's, AA by Standard and Poor's and AA-minus by Fitch.
Municipal Bond Funds See Inflows
Municipal bond funds stayed on a fund flow see-saw, reporting inflows for the latest week. Weekly reporting funds had $714.012 million of inflows in the week ended Oct. 7, after outflows of $252.457 million the week before, Lipper said Thursday.
The latest inflow brings to 20 out of 41 weeks this year that the funds have seen cash flowing in. Flows for the year to date remain in the green, totaling over $2.1 billion.
The four-week moving average went from red to green, as it is now positive at $70.434 million after being in the red at $132.065 million in the previous week. The moving average is now positive for the first time in 21 weeks. A moving average is an analytical tool used to smooth out price changes by filtering out fluctuations.
Long-term muni bond funds experienced inflows, gaining $685.022 million in the latest week, following outflows of $7.271 million in the previous week. Intermediate-term funds had inflows of $57.063 million after shedding $92.709 million in the prior week.
Exchange traded funds reported inflows of $185.961 million, on top of inflows of $137.849 million in the previous week.
And high-yield muni funds reported inflows of $270.816 million in the latest reporting week, after an outflow of $10.488 million the previous week.
MSRB Previous Session's Activity
The Municipal Securities Rulemaking Board reported 35,297 trades on Thursday on volume of $9.326 billion.
Bond Buyer Visible Supply
The Bond Buyer's 30-day visible supply calendar rose $1.89 billion to $12.00 billion on Friday. The total is comprised of $4.50 billion competitive sales and $7.50 billion of negotiated deals.
