In an unusually busy Monday, municipal bond issuers tried to beat the clock and complete sales ahead of the impending tax reform.
Now that the implications of tax legislation for munis have become clearer, with a final vote set for Tuesday, market participants focused on what is likely to be the last big supply week this year, with Christmas and New Year’s holiday's right around the corner.
“It was a busy Monday indeed, more a function of getting deals done before everyone leaves for holidays,” said one New York trader. ”The muni market feels good and is flowing well right now.”
The MBIS municipal non-callable 5% GO benchmark scale was weaker through trading up to Monday’s market close.
The 10-year muni benchmark yield rose to 2.283% from Friday’s final read of 2.274%, according to Municipal Bond Information Services. The MBIS 30-year benchmark muni yield increased to 2.751% from 2.745%.
The MBIS benchmark index, which is comprised of investment-grade municipal securities, is updated hourly on the Bond Buyer Data Workstation.
Top-rated municipal bonds ended weaker on Monday. The yield on the 10-year benchmark muni general obligation climbed four basis points to 2.03% from 1.99% on Friday, while the 30-year GO yield added four basis points to 2.62% from 2.58%, according to a final read of MMD’s triple-A scale.
U.S. Treasuries were mostly weaker at the market close on Monday. The yield on the two-year Treasury dipped to 1.83% from 1.84%, the 10-year Treasury yield climbed to 2.39% from 2.36% and the yield on the 30-year Treasury rose to 2.74% from 2.69%.
On Monday, the 10-year muni-to-Treasury ratio was calculated at 84.9% compared with 84.5% on Friday, while the 30-year muni-to-Treasury ratio stood at 96.6% versus 96.0%, according to MMD.
One thing to keep tabs on, according to the trader, is that if munis will do better in January, it will be because rates are higher, not lower.
“A very critical Treasury market technical is starting to flag possible higher rates coming,” he said.
Goldman Sachs priced the New York Metropolitan Transportation Authority’s $637.72 million of revenue refunding bonds. The bonds were priced to yield from 1.89% with a 5% coupon in 2023 to 3.314% with a 3.25% coupon in 2039. Term bonds were priced to yield 3.33% with a 4% coupon in 2042, 3.37% with a 4% coupon in 2046 and 3.456% with a 3.375% coupon in 2047. The deal is rated A1 by Moody’s Investors Service and AA-minus by S&P Global Ratings and Fitch Ratings.
“The retail period was very weak on MTA but that is more likely a result of launching on [a] Friday,” the trader said. “The institutional saw minimal upsizing only in two maturities but even with the Treasury market lower today, the deal looks to be going OK.”
Morgan Stanley priced San Francisco Public Utility Commission’s $406.775 million of water revenue bonds. The $349.395 million of 2017 sub-series D green bonds were priced to yield from 1.19% with a 2% coupon in 2018 to 2.56% with a 5% coupon in 2035.
The $48.675 million of 2017 sub-series E bonds were priced to yield from 1.57% with a 5% coupon in 2022 to 2.39% with a 5% coupon in 2031.
The $8.705 million of 2017 sub-series F bonds were priced to yield from 1.57% with a 5% coupon in 2022 to 2.39% with a 5% coupon in 2031. The deal is rated Aa3 by Moody’s and AA-minus by S&P.
Bank of America Merrill Lynch priced the Indiana Finance Authority’s $340.09 million of health system revenue bonds for the Franciscan Alliance Inc., Obligated Group. The $148.59 million of series 2017B bonds were priced to yield from 1.96% with a 5% coupon in 2022 to 2.89% with a 5% coupon in 2032.
The $191.5 million of series 2017C bonds were priced to yield from 1.74% with a 5% coupon in 2020 to 3.58% with a 3.25% coupon in 2039. The deal is rated Aa3 by Moody’s and AA by Fitch.
JPMorgan priced the State of Connecticut Health and Higher Educational Facilities Authority’s $383.38 million of revenue bonds for Yale University. The $123.27 million of series 2017 C-1 bonds were priced to yield 2.53% with a 5% coupon in a bullet 2040 maturity.
The $260.11 million of series 2017 C-2 bonds were priced to yield 1.84% with a 5% coupon in a bullet 2057 maturity. The deal is rated triple-A by Moody’s and S&P.
Wells Fargo priced Virginia Commonwealth University Health System’s $197.93 million of general revenue refunding bonds. The $97.925 million of series 2017A bonds were priced to yield from 1.82% with a 5% coupon in 2022 to 3.30% with a 4% coupon in 2037 and from 3.34% with a 4% coupon in 2040 to 2.56% with a 3.375% coupon in 2041.
The $100 million of series 2017B bonds were priced to yield from 1.57% with a 5% coupon in 2019 to 3.30% with a 4% coupon in 2037 and from 3.34% with a 4% coupon in 2040 to 3.56% with a 3.375% coupon in 2041. A term bond in 2046 was priced to yield 3.02% with a 5% coupon and a term bond in 2048 was priced to yield 3.63% with a 3.50% coupon and 3.625% coupon in a split maturity. The deal is rated Aa3 by Moody’s and AA-minus by S&P.
Citi priced California Health Finance Authority’s $141.83 million of revenue bonds for Sharp HealthCare. The bonds were priced to yield from 2.56% with a 5% coupon in 2031 to 2.71% with a 5% coupon in 2034 and from 2.77% with a 5% coupon in 2036 to 3.38% with a 3.25% coupon in 2039. A term bond in 2047 was priced to yield 3.23% with a 4% coupon and 2.88% with a 5% coupon in a split maturity. The deal is rated Aa3 by Moody’s and AA by S&P.
Morgan Stanley priced the Massachusetts Development Finance Agency’s $110.715 million of revenue bonds for the University of Massachusetts Healthcare Obligated Group. The bonds were priced to yield from 2.85% with a 5% coupon in 2027 to 3.14% with a 5% coupon in 2031. A term bond in 2037 was priced to yield 3.82% with a 3.625% coupon and a 2044 term was priced to yield 3.85% with a 4% coupon and 3.45% with 4% coupon and a 5% coupon in a split maturity. The deal is rated BBB-plus by S&P and A-minus by Fitch.
Previous week's top underwriters
The top municipal bond underwriters of last week included JPMorgan Securities, Morgan Stanley, Bank of America Merrill Lynch, Goldman Sachs and Citi, according to Thomson Reuters data.
In the week of Dec. 10 to Dec. 16, JPMorgan $2.98 billion, Morgan Stanley $2.68 billion, BAML underwrote $2.26 billion, Goldman $2.13 billion and Citi $1.91 billion.
Prior week's actively traded issues
Revenue bonds comprised 55.23% of new issuance in the week ended Dec. 15, down from 55.93% in the previous week, according to Markit. General obligation bonds made up 38.47% of total issuance, up from 38.20%, while taxable bonds accounted for 6.30%, up from 5.87% a week earlier.
Some of the most actively traded bonds by type were from Connecticut, Michigan and California issuers.
In the GO bond sector, the Connecticut 5s of 2018 were traded 57 times. In the revenue bond sector, the Michigan Finance Authority 5s of 2047 were traded 55 times. And in the taxable bond sector, the San Jose, Calif., Redevelopment Successor Agency 3.375s of 2034 were traded 78 times.
MSRB: Previous session's activity
The Municipal Securities Rulemaking Board reported 44,094 trades on Friday on volume of $18.712 billion.
Data appearing in this article from Municipal Bond Information Services, including the MBIS municipal bond index, is available on The Bond Buyer Data Workstation. Click here for a brief tour of the Workstation, or contact Vanessa Kim at 212-803-8474 for more information.