Market participants on Thursday will be watching the direction of bond yields after this week's turnabout. On Wednesday, prices of top-rated municipal bonds fell for the third day in a row as yields on some top-quality munis rose by as much as five basis points.
The $1 billion tax-exempt bond deal from the Trinity Health Credit Group was placed on the day-to-day calendar due to market conditions.
Primary Market
Trinity Health pushed back the planned sale of $1.1 billion of tax-exempt hospital revenue bonds amid this week's rising yields and shifted it to the day-to-day calendar until the market stabilizes. The borrowing would have been one of the largest to hit the market this week.
The Michigan-based provider was set to price $1.1 billion of tax-exempt bonds on Feb. 3 and $350 million taxable bonds on Feb. 5 or 6. The marketing team decided to shift the tax-exempt piece to the day-to-day calendar as borrowing rates rose. The taxable piece could still sell as early as Thursday, according to Mark Melio of Melio & Co., Trinity's financial advisor.
On Wednesday, JPMorgan priced the Iowa Finance Authority's $323.46 million of state revolving fund revenue bonds. The bonds were priced to yield from 0.08% with a 1% coupon in 2015 to 2.68% with a 5% coupon in 2035. The issue is rated triple-A by Moody's, S&P and Fitch.
The SRF bonds are designated "green bonds," since the proceeds will be used to finance projects that adhere to the federal Clean Water Act and Safe Drinking Water Act. Some of the proceeds will be used to refund outstanding bonds and some will be used to reimburse the SRF for disbursements to existing loans.
The Iowa Finance Authority, which manages borrowing for the SRF, will refund about $200 million in existing debt with the remainder of the transaction raising new money, said Lori Beary, the authority's SRF program coordinator.
Since its inception in 1975, the SRF has provided low-cost financing of more than $2.4 billion to over 500 municipalities to upgrade or construct their drinking water and wastewater infrastructure.
Secondary Market
Treasury prices were lower on Thursday. The two-year note yield rose to 0.52% from 0.51% on Tuesday; the 10-year yield increased to 1.82% from 1.79%, while the 30-year yield rose to 2.41% from 2.38%.
On Wednesday, the yield on the muni 10-year benchmark general obligation rose four basis points to 1.84% from 1.80% on Tuesday, while the yield on 30-year GOs increased five basis points to 2.64% from 2.59%, according to a final read of Municipal Market Data's triple-A scale.
Since Monday, yields on the 10-year have risen by 10 basis points as yields on the 30-year have risen by 14 basis points, reversing a month-long January trend that took yields down to near record lows. The 10-year muni hit an all-time low of 1.47% in 2012, while the 30-year muni's all-time low of 2.47% was also set in 2012.
The 10-year muni to Treasury ratio increased to 102.8% on Wednesday from 101.1% on Tuesday, while the 30-year muni to Treasury ratio rose to 110.9% from 109.3%.
MSRB Reports Previous Session's Activity
The Municipal Securities Rulemaking Board reported 38,458 trades on Wednesday on volume of $13.490 billion.
Most active on Wednesday, based on the number of trades, was the New Jersey State Transportation Trust Fund Authority Series AA transportation program 4 1/4s of 2044, which traded 103 times with an average price of 103.547 and an average yield of 3.796%.
Caitlin Devitt and Yvette Shields contributed to this report.
