Municipal bond traders are focusing on the week's hefty new issue calendar, which is kicking off with the sales of several big-ticket items. Municipal bond yields are moving slightly higher Tuesday, continuing the market sell-off that began last week.
J.P. Morgan Securities is the winner of the competitive sale of Washington Suburban Sanitary District, Md.'s $250 million unlimited tax general obligation consolidated public improvement bonds with a true interest cost of 3.4860%. The bonds were priced as serials to yield from 0.12% with a 2.00% coupon in 2015 to 3.59% with a 4.00% coupon in 2044.
The issue is of the highest credit quality, carrying ratings of triple-A from Moody's Investors Service, Standard & Poor's and Fitch Ratings.
Also in the primary, JPMorgan Securities priced the Arizona Transportation Board's $346.075 million revenue bonds. The bonds were priced as serials to yield from 0.93% with a 5.00% coupon in 2018 to 2.57% with a 5.00% coupon in 2025; the 2015 and 2016 maturities were offered as sealed bids. The issue is rated Aa1 by Moody's and AA-plus by Standard & Poor's.
In other activity, RBC Capital Markets priced $364.955 million Houston Independent School District, Texas, limited tax refunding bonds. The bonds were priced as serials to yield from 0.30% with a 5.00% coupon in 2016 to 3.26% with a 4.00% coupon in 2033.The bonds are backed by Texas' Permanent School Fund and rated triple-A by Moody's and Standard & Poor's. Moody's underlying rating is triple-A while S&P's is AA-plus.
Also on Tuesday, Baltimore is holding a retail order period for its $409.83 million water and wastewater revenue bonds in a new-money and refunding deal. The bonds will be priced for institutions by Wells Fargo Securities on Wednesday. The senior lien series is rated Aa2 by Moody's and AA by Standard & Poor's, while the subordinate lien series is rated Aa3 by Moody's and AA-minus by Standard & Poor's.
Today's Trading
Municipal bonds' yields rose Tuesday, with the benchmark 10-year triple-A GO and the 30-year GO at 2.17% and 3.08%, respectively, according to a preliminary read of Municipal Market Data's triple-A scale.
"The market's still a bit slippery," said a trader in Texas. "But it's got some tone to it."
He added, some November coupon money was still being put to work and traders were looking forward to the December reinvestment cash.
On Monday, muni yields rose, with bonds maturing from seven to eight years increasing by one basis point, according to MMD. Yields increased by two points for nine to 10 year maturities, and by one basis points for bonds maturing from 11 to 12 years and 20 to 30 years. The rest of the curve held steady.
Treasuries strengthened on Tuesday, with the two-year note yield up by two basis points to 0.51% from Monday's market close. The 10-year rose three basis points to 2.33% and 30-year increased by nine basis points to 3.05%, respectively.
Looking Ahead
Municipal bond investors still await the week's largest sale - Connecticut's $550 million GO offering. The bonds will be priced in three series on Thursday by JPMorgan Securities.
The $240 million Series F green bonds will mature from 2015 to 2034, while the $60 million Series G portion will mature from 2028 to 2031, and Series H, which totals $250 million, will mature from 2016 to 2026. The bonds are rated AA3 by Moody's and AA by both Standard & Poor's and Fitch.
"In early October MMD found that Connecticut had the eighth highest spread among issuers tracked by MMD," according to Senior MMD Analyst Daniel Berger. "Since then spreads have increased slightly and in the 10-year range this spread is +30 basis points. For example on Friday there were $1 million+ 5s of 3/2032 (c24) that traded at 3.02% (+30.5 basis points.) We can expect similar levels this week."
