The municipal bond market is seeing the last of the week's big deals price after as much as $8 billion of new supply that came to market on Wednesday.
Investor demand for the new issues is expected to remain high, several market participants reported, ahead of the wind down of 2014.
Primary Market
Nassau County, N.Y., came to market on Thursday with two separate issues totaling about $439 million, consisting of a competitive bond sale and negotiated note deal.
J.P. Morgan Securities won the $238.87 million general improvement bonds with a true interest cost of 2.9941%. The bonds were priced to yield from 0.50% with a 5% coupon in 2016 to 3.13% with a 5% coupon in 2029; the 2030 maturity was not reoffered. The issue is rated A2 by Moody's Investors Service, A-plus by Standard & Poor's and A by Fitch.
In the short-term sector, Bank of America Merrill Lynch priced the $200 million general obligation tax anticipation notes, Series A and B. The Series A notes were priced to yield 0.34% with a 2% coupon in September 2015; the Series B notes were priced to yield 0.35% with a 2% coupon on October 2015. The issue is rated SP1-plus by S&P and F1 by Fitch.
Bank of America Merrill Lynch priced $336.53 million Massachusetts Federal Highway grant anticipation notes (accelerated bridge program). The issue was priced to yield from 0.27% with a 2% coupon in 2016 to 2.48% with a 5% coupon in 2027. The issue is rated Aa1 by Moody's and triple-A by S&P.
PNC Capital Markets priced $294.22 million Pennsylvania Turnpike Commission turnpike revenue bonds. The issue was priced to yield from 1.18% with a 4% coupon in 2018 to 3.74% with a 5% coupon in 2044. The bonds are rated A1 by Moody's and A-plus by S&P and Fitch.
Citigroup Global Markets priced $130.125 million El Paso, Texas, water and sewer revenue refunding bonds. The issue was priced to yield from 0.37% with a 3% coupon in 2016 to 3.63% with a 3.50% coupon in 2035. The bonds are rated AA-plus by S&P and Fitch.
Bank of America Merrill Lynch priced for institutions $96 million Build New York City Resource Corp. solid waste disposal revenue bonds for the Pratt Paper Inc. project. The bonds were priced at par to yield 3.75% in 2020, 4.50% in 2025 and 5% in 2035. The issue is not rated.
Secondary Market Trading
High-grade municipal bond yields were lower on Thursday. The yield on the benchmark 10-year general obligation was off as much as two basis points from 2.08% at Wednesday's close while the yield on 30-year GOs was down one to three basis points from 3.02% on Wednesday, according to the midday read of Municipal Market Data's triple-A scale.
Treasury yields were slightly lower on Thursday, with the two-year note yield falling to 0.54% from 0.55% on Wednesday. The 10-year yield decreased to 2.27% from 2.29% while the 30-year slipped to 2.97% from 2.99% on Wednesday.
On Wednesday, the 10-year muni-to-Treasury ratio closed at 91.1% versus 91.1% on Tuesday; the 30-year muni to Treasury ratio closed at 101.0%, compared with 100.6% on Tuesday.
Puerto Rico Trading
On Wednesday, the FBI charged the Puerto Rico Highways and Transportation Authority treasurer with accepting bribes, only a day after the commonwealth's House of Representatives passed a bill backing a $2.9 billion bond, the first stage in a process that would support the authority's shaky finances.
Looking at its market activity on Wednesday, Puerto Rico HTA 5 1/4s of 2039 traded 20 times on Wednesday on volume of $780,000 with a high/low price of 68.665/68.069 and a high/low yield of 8.321%/8.244%, according to the Municipal Securities Rulemaking Board's EMMA website. In contrast, on Tuesday the bonds traded nine times on volume of $635,000 with a high/low price of 69.625/67.065 and a high/low yield of 8.452%/8.123%.
Puerto Rico HTA 4.95s of 2026 traded 12 times on Wednesday, on volume of $360,000 with a high/low price of 102.128/100.126 and a high/low yield of 4.923%/4.513%. The bonds traded on Tuesday seven times on volume of $375,000 with a high/low price of 102.128/98.397 and a high/low yield of 5.135%/4.513%, according to EMMA.
The HTA 5 1/4s of 2036 traded seven times on volume of $415,000 with a high/low price of 100.899/98.49 and a high/low yield of 5.369%/5.18%. The bonds traded on Tuesday three times on volume of $15,000 with a high/low price of 98.75/94.75 and a high/low yield of 5.675%/5.348%.
The HTA 5 1/4s of 2038 traded six times on volume of $115,000 with a high/low price of 93.586/89.366 and a high/low yield of 6.107%/5.75%. The bonds traded on Tuesday 11 times on volume of $750,000 with a high/low price of 94/89.564 and a high/low yield of 6.089%/5.716%.
The HTA 4s of 2015 traded four times on volume of $4,000,000 with a high/low price of 89/97.8 and a high/low yield of 28.945%/26.206%. The bonds last traded on Nov. 21 three times on volume of $30,000 with a high/low price of 95.373/94.623 and a high/low yield of 13.661%/12.253%, according to EMMA.
MSRB: Previous Session's Activity
The Municipal Securities Rulemaking Board reported 44,152 trades on Wednesday for volume of $13.603 billion. Most active on Wednesday, based on the number of trades, were the New Jersey State Trust Fund Authority Transportation Program's 2014 Series AA 4 ¼s of 2044 which traded 212 times with an average price of 99.323 for an average yield of 4.284%. This same issue was also the most actively traded on Thursday, trading 101 times at a high/low price of 101.0/98.345 and a high/low yield of 4.35%/4.122%.
Long-Term Municipal Mutual Funds See Inflows
Long-term municipal bond mutual funds reported $769 million of inflows for the week ended Nov. 25, according to the Investment Company Institute. This compares to inflows of $771 million in the previous week.
Taxable bond funds saw inflows of $2.590 billion versus inflows of $1.758 billion for the previous week, ICI reported. This brought total bond fund inflows to $2.59 billion for the week ended Nov. 25 compared to inflows of $2.530 billion in the previous week, ICI said.
"Demand for tax-free bonds remains solid," Janney Capital Markets says in its latest research report.
Janney said, however, while the new investment brought the annual inflow total to $23.7 billion, "It's notable, however, that muni funds still have not recouped 2013's net outflows of $56 billion."
Tax-Exempt Money Market Assets Slip
Tax-exempt money market fund assets slipped $800,000 to $252.65 billion in the week ended Dec. 2, according to The Money Fund Report, a service of iMoneyNet.com. The decline compares to a fall of $148.9 million in the previous week.
The average seven-day yield for the 409 weekly reporting tax-exempt money market funds remained unchanged at 0.1%.
Overall, the combined total assets of the 1,406 weekly reporting money market funds rose $7.84 billion to $2.694 trillion in the latest reporting week.
Comparative Fiscal Model for N.J., Ill.
A new
The model is designed to provide analysts with a tool to run sensitivity scenarios for the two worst-rated states in the U.S. and will also let firms to design their own analysis.
"Given our expectations that Illinois and New Jersey will be among the major muni credit stories of 2015, we are pleased to share our latest analytical toolkit focusing on these two issuers," the firm said in a press release.
NewOak is an independent firm and has no political affiliation. It previously introduced a toolkit to help credit analysts look at Puerto Rico Electric Power Authority.
