The municipal bond market is gearing up Tuesday to take on the first of the week's big new issues as several large sales are set to come to market.
Treasury prices were lower in early trading, with the 10-year yield moving above the psychologically important 2% level.
Primary Market
Muni volume for the week is estimated at $7.211 billion.
Leading the competitive calendar are three separate sales from Washington state totaling about $393 million.
All three series will go up for competitive bidding on Tuesday and consist of: $132.475 million Series R-2015H general obligation refunding motor vehicle fuel tax bonds; $112.960 million Series R-2015G GO refunding various purpose bonds, and $147.185 million Series R-2015F GO refunding motor vehicle fuel tax bonds.
Washington was just in the market last month, when it sold about $1 billion of bonds.
Topping the negotiated slate is the South Carolina Public Service Authority's $1.06 billion of revenue obligations. The deal, for Santee Cooper, is scheduled to be priced by Barclays Capital on Wednesday after a one-day retail order period on Tuesday.
Also on tap are the $300 million Pennsylvania Higher Education Facilities Authority fixed-rate revenue bonds for Thomas Jefferson University to be priced by the Bank of America Merrill Lynch on Thursday after a one-day retail order period on Wednesday.
And the Maryland Department of Transportation plans a competitive sale of $280 million consolidated transportation bonds on Wednesday.
Puerto Rico Trades
On Monday, prices of Puerto Rico general obligation bonds traded lower after a federal judge ruled that the commonwealth's Recovery Act was unconstitutional. Bonds of the Puerto Rico Electric Power Authority (PREPA) traded higher.
On Tuesday, Moody's Investors Service said the ruling, which the commonwealth will appeal, is credit neutral "because it does not alleviate the fundamental pressures on Puerto Rico's central government, or on its public corporations, which can restructure and default outside of the bankruptcy-like process that the law was meant to provide."
Moody's added, "This decision also does not change our view on the likelihood of a PREPA default, which we expect to occur later this year and which is already incorporated in our Caa3 rating."
According to the MSRB's EMMA website, the PREPA 2010 Series ZZ power revenue 5s of 2018 traded one time on Tuesday at a price of 59.25, a yield of 22.959%, on volume of $4.615 million. In contrast, the bonds traded Monday at 59, a yield of 23.098%, on volume of $4.615 million, and on last Wednesday two times at a low price of 50.375, a high yield of 28.884%, on volume of $9.03 million, according to EMMA.
The PREPA 2008 Series WW power revenue bond 5s of 2028 traded two times on Monday at a low price of 49.85, a high yield of 12.999%, on volume of $225,000. In contrast, the bonds traded three times on Friday at a low price of 46.77, a high yield of 13.837% on volume of $30,000.
Puerto Rico GO 8s Series 2014A of 2035 traded 31 times on Monday on volume of $65.85 million with a low price of 81, a high yield of 10.235%. This was lower than on Friday, when the GOs traded 21 times on volume of $58.6 million with a low price of 83.375, a high yield of 9.912%.
Secondary Market
Treasury prices were lower on Tuesday. The two-year note yield rose to 0.66% from 0.64% on Monday, while the 10-year yield increased to 2.01% from 1.94% and the 30-year yield was up to 2.59% from 2.51%.
On Monday, prices of top-rated municipal bonds closed slightly weaker, traders said. The yield on the muni 10-year benchmark general obligation rose one basis point to 1.96% from 1.95% on Friday, while the yield on 30-year GOs was up two basis points to 2.77% from 2.75%, according to the final read of MMD's triple-A scale.
Since the start of the month, the yield on the muni 10-year benchmark general obligation is up by 22 basis points, while yield on the 30-year GO is 27 basis points higher, according to MMD.
The 10-year muni to Treasury ratio was calculated at 100.9% on Monday from 100.6% on Friday, while the 30-year muni to Treasury ratio stood at 110.1% compared to 109.7% on Friday.
MSRB Reports Previous Session's Activity
The Municipal Securities Rulemaking Board reported 31,428 trades on Monday on volume of $6.449 billion.
Most active on Monday, based on the number of trades, was the Wayne County Building Authority, Mich., 2010 taxable jail 10s of 2040, which traded 82 times with an average price of 94.845 and an average yield of 10.578%.
