The municipal bond market grabbed the last of the week's big new issues Thursday as the Massachusetts Educational Financing Authority and Milwaukee sold bonds into a market that "was in a world of its own."
Primary market
RBC Capital Markets priced the Massachusetts EFA’s (NR/AA/NR) $208 million of Series 2019 Issue L education loan revenue bonds consisting of senior Series 2019A taxables, senior Series 2019B tax-exempts subject to the alternative minimum tax and subordinate Series 2019C AMT bonds.
Milwaukee, Wisconsin, (NR/AA-/AA) sold $121.08 million of general obligations consisting of $94.975 million Series 2019N3 GO promissory notes and $26.105 million Series 2019B4 GO corporate purpose bonds. BofA Securities won the issue with a true interest cost of 2.2506%. Milwaukee (NR/SP1+/F1+) also sold $120 million of Series 2019R2 revenue anticipation notes. Three groups won the RANs: TD Securities, Wells Fargo Securities and JPMorgan Securities. PFM Financial Advisors is the financial advisor; Katten Muchin and Hurtado Zimmerman are the bond counsel.
The Florida Department of Transportation (A1/A/A+) sold $86.64 million of Series 2019A Sunshine Skyway revenue bonds. Goldman Sachs won the bonds with a TIC of 2.7693%. Proceeds will be used to finance transportation projects in Hillsborough, Pinellas and Manatee Counties. The state Division of Bond Finance was the financial advisor; Bryant Miller was the bond counsel.
Wednesday’s bond sales
Secondary market
Munis were stronger on the
On Refinitiv Municipal Market Data’s AAA benchmark scale, the yield on both the 10-year GO and the 30-year muni were unchanged.
"Under normal circumstances, the municipal market is heavily influenced by how the Treasury market is performing,” said Michael Pietronico, CEO of Miller Tabak Asset Management. “While this will hold true in the future — right now municipals are in a world of their own where supply just cannot keep up with demand.”
He added there remains good value in the intermediate kicker bond market and also lower-coupon A-rated credits.
“The typical 5% coupon AA-rated new-issue bond has completely topped out and is saddled with a purchase price that in some cases exceeds 120, which is very unattractive in our view,” he said.
Treasuries were weaker as stocks traded down.
The 10-year muni-to-Treasury ratio was calculated at 72.5% while the 30-year muni-to-Treasury ratio stood at 86.0%, according to MMD.
“The two-year/10-year spread on the ICE Muni Yield Curve has continued to narrow, currently at 30 basis points, the tightest since October 2018. Investor demand for tax-free yield has caused yields to compress of late,” ICE Data Services said in a Thursday comment. “Today is the culmination of a light new-issue calendar for this week with less than $1 billion in new issues for the day. Inflows this week have reportedly been about $2 billion, soaking up this week’s supply. The ICE Muni Yield Curve is range-bound with yields up slightly in the long end, by less than ½ basis point. Puerto Rico, high-yield and tobaccos are similarly unchanged. Taxable yields are up, led by the five-year’s 4.5 basis point rise."
Previous session's activity
The MSRB reported 41,798 trades on Wednesday on volume of $17.74 billion. The 30-day average trade summary showed on a par amount basis of $12.32 million that customers bought $5.96 million, customers sold $4.12 million and inter-dealer trades totaled $2.24 million.
California, New York and Texas were most traded, with the Golden State taking 15.008% of the market, the Empire State taking 13.228% and the Lone Star State taking 12.355%.
The most actively traded security was the Puerto Rico Sales Tax Financing Corp. restructured Series A-1 zeros of 2051 which traded 78 times on volume of $82.93 million.
Muni money market funds see inflows
Tax-exempt municipal money market fund assets increased $80.1 million, with total net assets growing to $132.59 billion in the week ended April 29, according to the Money Fund Report, a publication of Informa Financial Intelligence.
The average seven-day simple yield for the 186 tax-free and municipal money-market funds jumped to 1.72% from 1.49% last week.
Taxable money-fund assets fell $22.19 billion in the week ended April 30, bringing total net assets to $2.898 trillion. The average, seven-day simple yield for the 808 taxable reporting funds nudged up to 2.08% from 2.07% last week.
Overall, the combined total net assets of the 994 reporting money funds decreased $22.37 billion to $3.030 trillion in the week ended April 30.
NYC bonds sold in 1873 won’t mature until 2147
When New York City issues bonds today, the longest-dated maturities usually go out to 30 years.
However, this wasn’t always the case and you can just look to the past to see how different the times were.
“In 1873 … bonds were sold with a 274-year final maturity. These bonds were issued in the last of six transactions to fund the construction of a road to one of the nation’s first racetracks. That road is now known as Jerome Avenue and the racetrack is now the site of Jerome Park Reservoir,” according to Marj Henning, NYC’s Deputy Comptroller for Public Finance.
“New York City assumed the debt upon annexing the two communities that issued the bonds and has been paying interest on them all these years. The bonds bear a 7% interest rate with maturities ranging from 2001 to 2147,” she wrote in the monthly finance wrap-up report.
For bondholders, there's only 128 years to go before that final due date.
Treasury auctions bills
The Treasury Department Thursday auctioned $50 billion of four-week bills at a 2.390% high yield, a price of 99.814111. The coupon equivalent was 2.434%. The bid-to-cover ratio was 2.70. Tenders at the high rate were allotted 38.77%. The median rate was 2.360%. The low rate was 2.330%.
Treasury also auctioned $35 billion of eight-week bills at a 2.390% high yield, a price of 99.628222. The coupon equivalent was 2.439%. The bid-to-cover ratio was 2.70. Tenders at the high rate were allotted 87.80%. The median rate was 2.370%. The low rate was 2.330%.
Treasury announces bill auctions
Treasury Department said Thursday it will auction $39 billion 91-day bills and $36 billion 182-day discount bills Monday.
The 91s settle May 9, and are due Aug. 8, and the 182s settle May 9, and are due Nov. 7. Currently, there are $38.993 billion 91-days outstanding and $25.999 billion 182s.
Treasury sells CMBs
The Treasury Department Thursday sold $20 billion 37-day cash management bills, dated May 7, due June 13, at a 2.385% high tender rate. The bid to cover ratio was 3.27.
The coupon equivalent was 2.431%. The price was 99.754875. The low bid was 2.330%. The median bid was 2.360%. Tenders at the high were allotted 34.91%.
Gary E. Siegel contributed to this report.
Data appearing in this article from Municipal Bond Information Services, including the MBIS municipal bond index, is available on The Bond Buyer Data Workstation.
