Top-shelf municipal bonds ended weaker on Thursday, traders said, as Massachusetts' $1.12 billion of general obligation bonds came to market.
Bank of America Merrill Lynch priced the Bay State's GO deal for institutional investors after a one-day retail order period. The issue is comprised of $600 million of new money consolidated loan of 2016 Series A bonds and $522.27 million of 2016 Series A refunding bonds.
The new money bonds were priced to yield 0.22% with a 5% coupon in 2016 and to yield from 0.97% with 3% and 5% coupons in a spilt 2020 maturity to 2.79% with a 5% coupon in 2038; a 2041 split maturity was priced as 4s to yield 3.31% and as 5s to yield 2.96%; a 2046 maturity was priced as 5s to yield 3.02%.
The refunding bonds were priced as 5s to yield 0.22% in 2016 and to yield from 0.97% with 3% and 5% coupons in a split 2020 maturity to 3.13% with a 3% coupon in 2033.
In the past five years, from 2011 through 2015, the state has issued about $13.31 billion of debt.
The issue is rated Aa1 by Moody's Investors Service, and AA-plus by Standard & Poor's and Fitch Ratings.
JPMorgan priced the Los Angeles County Public Work Financing Authority’s $257.26 million of Series 2016D lease revenue bonds for retail investors.
The issue was priced to yield from 0.60% with a 4% coupon in 2017 to 3.36% with a 4% coupon in 2036; a 2045 maturity was priced as 4s to yield 3.54% and a 2045 maturity was priced as 5s to yield 3.27%.
The deal is rated A1 by Moody’s, AA by S&P and AA-minus by Fitch.
RBC Capital Markets received the official award on the Omaha Public Power District, Neb.'s $103.69 million of Series 2016A separate electric system revenue bonds. The issue was priced to yield from 0.71% with a 3% coupon to 3,43% with a 4% coupon in 2036; a 2041 maturity was priced as 5s to yield 3.35%, a 2046 maturity was priced as 5s to yield 3.41% and a 2049 maturity was priced as 5s to yield 3.50%. The bonds were rated A1 by Moody's and A-plus by S&P.
In the competitive arena, Fremont Unified School District, Calif., sold $130 million of Series B Election of 2014 GOs. Morgan Stanley won the issue with a true interest cost of 3.36%. Pricing details were not available. The deal is rated Aa2 by Moody's and AA-minus by S&P.
Secondary Market
The yield on the 10-year benchmark muni general obligation rose three basis points to 1.86% from 1.83% on Wednesday, while the 30-year muni yield rose one basis point to 2.88% from 2.87%, according to the final read of Municipal Market Data's triple-A scale.
Treasuries were mixed on Thursday. The yield on the two-year Treasury dipped to 0.84% from 0.85% on Wednesday, while the 10-year Treasury yield dropped to 1.84% from 1.85% and the 30-year Treasury bond yield decreased to 2.66% from 2.69%.
The 10-year muni to Treasury ratio was calculated on Thursday at 102.2% compared to 99.2% on Wednesday, while the 30-year muni to Treasury ratio stood at 108.3% versus 106.8%, according to MMD.
MMD: New York City GO Spreads Widen
In the secondary, the big story on Wednesday was widening New York City GO spreads, according to MMD.
"For instance, NYC GO 5s in 8/2022 and 8/2023 traded at +35 basis points to implied versus +27/+29 bps at the end of last week," MMD Senior Market Strategist Daniel Berger wrote in a Thursday market comment. "Further out, NYC GO 5s in 8/2025 sold to a customer at 2.09% (+37 bps to implied) compared to +32 bps distribution on Thursday and NYC GO 5s (c26) of 8/2029 changed hands as wide as +40 bps versus +35 bps over the past week."
Berger said the widening was not credit related, but rather reflected the large amount of new issuance coming from big names.
"New York City, (Aa2/AA) with about $38.5 billion of debt outstanding is a lot like (Aa3/AA-/A+) California (which has more than $90 billion of debt outstanding) because the two are massive issuers of debt," Berger wrote. "Sometimes it just seems that these names get backed up when they (or other issuers in their area) issue a lot of debt. That appears to be the case as the New York calendar remains robust in the near future."
Tax-Exempt Money Market Funds Post Outflows
Tax-exempt money market funds experienced outflows of $4.49 billion, bringing total net assets to $238.97 billion in the week ended Feb. 29, according to The Money Fund Report, a service of iMoneyNet.com. This followed an inflow of $619.9 million to $243.46 billion in the previous week.
The average, seven-day simple yield for the 354 weekly reporting tax-exempt funds remained at 0.01% for the 148th straight week.
The total net assets of the 939 weekly reporting taxable money funds increased $9.30 billion to $2.565 trillion in the week ended March 1, after an inflow of $34.79 billion to $2.556 trillion in the prior week.
The average, seven-day simple yield for the taxable money funds remained at 0.10% for the fourth week in a row.
Overall, the combined total net assets of the 1,293 weekly reporting money funds increased $4.81 billion to $2.804 trillion in the period ended March 1, which followed an inflow of $35.41 million to $2.799 trillion.
