Top-quality municipal bonds were steady at mid-session, traders said, as they eye a large deal that came to market from an issuer in the Aloha State.
Primary Market
Bank of America Merrill Lynch priced Honolulu City and County, Hawaii's $384.01 million of first bond resolution wastewater system revenue senior series 2016A and senior series 2016B refunding bonds.
The $214.04 million of Series 2016A bonds were priced to yield from 0.57% with a 5% coupon in 2018 to 2.27% with a 5% coupon in 2036; a 2041 term bond was priced as 3s to yield 3.02% and a 2046 term was priced as 3s to yield 3.07%
The $169.97 million of Series 2016B bonds were priced to yield from 1.13% with a 5% coupon in 2022 to 2.29% with a 5% coupon in 2037.
The deal is rated Aa2 by Moody's Investors Service and AA by Fitch Ratings.
Since 2006, the issuer has sold $6.26 billion of securities, with the largest sales in 2015 when it offered $1.59 billion. Honolulu only issued more than $1 billion one other time in that period, in 2012, which was followed by a two-year absence from the market.
In the competitive arena, the Louisville and Jefferson County Visitors and Convention Commission, Ky., sold $138.59 million of Series 2016 dedicated tax revenue bonds. BAML won the bonds with a true interest cost of 3.22%.
The issue was priced to yield from 1% with a 3% coupon in 2017 to 3.35% with a 4% coupon in 2036; a 2041 term was priced as 3 1/8s to yield approximately 3.24% and a 2046 term was priced as 3 1/8s to yield about 3.20%.
The deal is rated A2 by Moody's and A by S&P Global Ratings except for the 2046 maturity which is insured by Assured Guaranty Municipal.
Bond Buyer Visible Supply
The Bond Buyer's 30-day visible supply calendar decreased $1.63 billion to $9.94 billion on Wednesday. The total is comprised of $3.88 billion of competitive sales and $6.06 billion of negotiated deals.
Citi Sees Robust Issuance Near-Term
While municipal bond issuance dropped 27% in July compared to July 2015, it has started to pick up again, according to new report from Citi Research.
"Now that the extreme market volatility following the Brexit event, which led to whip-sawing yields, is behind us, we expect the forward issuance calendar to stay robust," Citi analysts Vikram Rai and Jack Muller wrote in the report. "Our estimate for gross issuance for 2016 remains unchanged at $413 billion, split almost evenly between new money and refundings."
Citi said that despite the dramatic fall in supply last month, year-to-date issuance is off only about 1.6%, mostly due to the large volume gains in May (13.5% year over year) and June (17.6% year over year).
Secondary Market
The yield on the 10-year benchmark muni general obligation was unchanged from 1.41% on Tuesday, while the yield on the 30-year muni was steady from 2.14%, according to a read of Municipal Market Data's triple-A scale.
U.S. Treasuries were mixed on Wednesday. The yield on the two-year Treasury rose to 0.76% from 0.74% on Tuesday, the 10-year Treasury yield was unchanged from 1.57% and the yield on the 30-year Treasury bond decreased to 2.28% from 2.29%.
On Tuesday, the 10-year muni to Treasury ratio was calculated at 89.5% compared to 90.4% on Monday, while the 30-year muni to Treasury ratio stood at 93.2% versus 93.6%, according to MMD.
MSRB: Previous Session's Activity
The Municipal Securities Rulemaking Board reported 36,125 trades on Tuesday on volume of $9.87 billion.
