Municipal bond traders were set for a second wave of new issuance to sweep over the market on Thursday. Riding the crest of the supply wave will be the North Texas Tollway Authority System's $750 million bond sale, buoyed by two recent rating upgrades.
Secondary Trading
Treasury prices were mostly lower on Thursday, with the yield on the two-year Treasury note slipping to 0.72% from 0.74% on Wednesday, while the 10-year yield rose to 2.20% from 2.19% and the 30-year yield increased to 2.98% from 2.95%.
The yield on the 10-year benchmark muni general obligation on Wednesday finished two basis points stronger at 2.22% from 2.20% on Tuesday, while the yield on the 30-year GO was three basis points stronger at 3.17% from 3.14%, according to the final read of Municipal Market Data's triple-A scale.
The 10-year muni to Treasury ratio was calculated on Wednesday at 101.9% versus 100.5% on Tuesday, while the 30-year muni to Treasury ratio stood at 107.8% compared to 105.7%, according to MMD.
Primary Market
Barclays Capital is set to price the biggest deal of the week – the NTTA’s $750 million of Series 2015B first-tier revenue refunding bonds.
The authority recently saw two rating upgrades, as Moody's Investors Service raised its rating to A1 from A2 on Aug. 27 and Standard & Poor’s increased its rating to A from A-minus on Aug. 28.
The NTTA board has authorized refunding of up to $1 billion of debt issued in 2008, but chief financial officer Horatio Porter told The Bond Buyer last week the deal is likely to end up in the $750 million to $760 million range. At that size, NTTA will have refunded about $1.7 billion of debt in 2015. No more issues are expected from the authority this year.
Based on a par amount of $764 million, NTTA expects net present value savings of about $52 million or 7%, and a reduction in maximum annual debt service of $17 million. That would bear out with a true interest cost of 4.46%, according to an NTTA presentation to the ratings agencies.
Also on Thursday, RBC Capital Markets is slated to price the University of Oklahoma's $245 million of general revenue bonds consisting of Series 2015C tax-exempts and Series 2015D taxables.
Proceeds of the sale will go toward redesign of the university’s football stadium in Norman, Okla.
The issue is rated A-plus by S&P and AA-minus by Fitch Ratings.
The bonds will be issued through the Oklahoma Capitol Improvement Authority as $196.9 million of tax-exempt Series C and $42.2 million of taxable Series D.
OU will use $117 million for redevelopment of the south end of Gaylord Family-Memorial Stadium at the main campus in Norman. Donations from the Gaylord Family Foundation and others will be added to the bond proceeds to finance the $160 million stadium project, officials said.
"This is the largest transaction OU has ever done," Kelsi Spurgeon, principal at Columbia Capital Management, the financial advisor on the sale, told The Bond Buyer last week.
In the negotiated short-term market, JPMorgan Securities is set to price the Detroit School District’s $121 million of Series 2015E junior subordinate lien obligations. The state aid revenue notes are being issued through the Michigan Finance Authority.
They are rated SP3 by S&P.
Bank of America Merrill Lynch is expected to price the University of Hawaii’s $189 million revenue bonds for institutions. The issue is rated Aa2 by Moody’s A-plus by S&P and AA by Fitch. The deal will be comprised of five series, of which only $8.6 million is new money.
Tax-Exempt Money Market Funds See Inflows
Tax-exempt money market funds experienced inflows of $2.23 billion, bringing total net assets to $248.92 billion in the period ended Sept. 7, according to The Money Fund Report, a service of iMoneyNet.com. This followed an outflow of $810.7 million to $246.69 billion in the previous week.
The average, seven-day simple yield for the 377 weekly reporting tax-exempt funds remained at 0.01% for the 123rd straight week.
The total net assets of the 949 weekly reporting taxable money funds fell $13.42 billion to $2.427 trillion in the period ended Sept. 8, after experiencing an outflow of $28.53 billion to $2.440 trillion in the prior week.
The average, seven-day simple yield for the taxable money funds remained at 0.02% for the 34th week in a row.
Overall, the combined total net assets of the 1,326 weekly reporting money funds decreased $11.19 billion to $2.675 trillion in the period ended Sept. 1, which followed an outflow of $29.34 billion to $2.687 trillion the week before.
MSRB Previous Session's Activity
The Municipal Securities Rulemaking Board reported 36,817 trades on Wednesday on volume of $6.450 billion.
Bond Buyer Visible Supply
The Bond Buyer's 30-day visible supply calendar fell $64.2 million to $8.16 billion on Thursday. The total is comprised of $2.99 billion competitive sales and $5.17 billion of negotiated deals.
Richard Williamson and Keeley Webster contributed to this report
