Municipal bond traders on Friday were taking a quick respite from the onslaught of new issuance this week and getting their records in orders before looking ahead to the next week’s primary slate.
Secondary Market
Treasuries were mixed on Friday. The yield on the two-year Treasury rose to 0.95% from 0.92% on Thursday, while the 10-year Treasury yield was unchanged from 1.93% and the 30-year Treasury bond yield was flat from 2.69%.
Top quality municipal bonds finished mostly steady on Thursday. The yield on the 10-year benchmark muni general obligation was steady from 1.88% on Wednesday, while the 30-year muni yield was flat from 2.86%, according to the final read of Municipal Market Data's triple-A scale.
The 10-year muni to Treasury ratio was calculated on Thursday at 97.7% compared to 99.4% on Wednesday, while the 30-year muni to Treasury ratio stood at 106.1% versus 106.5%, according to MMD.
MSRB Previous Session's Activity
The Municipal Securities Rulemaking Board reported 42,430 trades on Thursday on volume of $16.39 billion.
The Week’s Primary Market
On Friday, the New York City Transitional Finance Authority will hold a second day for retail orders on its $750 million of building aid revenue bonds, Fiscal 2016 Series S-1. The deal will be priced for institutions on Monday.
Ramirez & Co. priced the issue for retail Thursday to yield from 0.96% with a 3% coupon in 2019 to 3.21% with a 4% coupon in 2036; a 2045 maturity was priced as 4s to yield 3.45%. No orders were taken in the 2028-2030, 2032, 2034-2035, 2040 or 2044 maturities. The 2017 and 2018 maturities were offered as sealed bids.
The bonds are rated Aa2 by Moody’s Investors Service and AA Standard & Poor’s and Fitch Ratings.
The biggest municipal bond deal of the year came to market on Tuesday, with buyer demand driving California to increase the size of the sale by about $600 million to almost $3 billion.
Citigroup priced California's $2.95 billion of general obligation bonds for institutions after a one-day retail order period. The sale was originally sized at about $2.3 billion.
The deal was most-heavily oversubscribed for the longer maturity bonds, traders said, adding that the rest of issue was well received, too, leading to the issue's upsizing.
The California deal is rated Aa3 by Moody's, AA-minus by S&P and A-plus by Fitch.
“Extremely high demand for the California tax-exempt bonds helped the State Treasurer’s Office obtain the lowest borrowing costs on 30-year bonds in the last three decades,” Treasurer John Chiang said in a press release. “The spread between the state’s new general obligation bonds and a widely used municipal bond market benchmark was the most favorable since 2005.”
The low yields allowed the state to refinance $1.96 billion in higher-interest-paying bonds, saving California taxpayers $398.5 million over the remaining life of the bonds, the Treasurer’s office said.
“The market reception California received on this sale confirms that California is on the right track financially,” Chiang said. “The consistent restraint shown by the governor and Legislature in recent budgets, coupled with voter approval of Proposition 2, which strengthened the state’s rainy day fund, contributed to a positive investment environment that benefits all Californians.”
Both retail and institutional investors showed extremely strong interest in the bond offerings. Retail investors placed $1.3 billion in orders.
Elsewhere this week, Bank of America Merrill Lynch priced the Empire State Development Corp. Urban Development Corp.'s $1.66 billion of Series 2016A general purpose personal income tax revenue bonds for institutions after a one-day retail order period. The New York State bonds are rated triple-A by S&P and AA-plus by Fitch.
The Las Vegas Valley Water District, Nev., came to market with two sales totaling $605.86 million. Citigroup priced the district’s $497.64 million of Series 2016A limited tax general obligation improvement and refunding bonds. Morgan Stanley priced the district’s $108.22 million of Series 2016B limited tax GO water refunding bonds, additionally secured by pledged revenues. Both deals are rated Aa1 by Moody’s and AA by S&P.
Citi priced the Dallas Independent School District, Texas' $266.45 million of Series 2016B multi-modal unlimited tax school building bonds in six series. The issue is backed by the Permanent School Fund guarantee program and is rated triple-A by Moody's, S&P and Fitch.
Morgan Stanley priced the Louisiana Public Facilities Authority’s $198.68 million of Series 2016A and B refunding revenue bonds for the Entergy Louisiana Project. The bonds were expected to be rated by A2 by Moody’s and A-minus by S&P.
The New York City Housing Development Corp. came to market with two separate issues totaling $166.83 million. JPMorgan Securities priced the HDC's $124.29 million of multi-family housing revenue bonds. The issue is rated Aa2 by Moody's and AA-plus by S&P. Barclays Capital priced the HDC's $42.51 million of Series 2016B term-rate multi-family housing revenue bonds. The issue is rated VMIG-1 by Moody's and A1-plus by S&P.
Ramirez priced the Ohio Water Development Authority's $167.94 million of Fresh Water Series 2016A water development revenue bonds. The deal is rated triple-A by Moody's and S&P.
In the competitive arena, the New Jersey Educational Facilities Authority sold two issues totaling $217.22 million for Princeton University. Goldman Sachs won the $117.22 million of Series 2016B revenue refunding bonds with a true interest cost of 1.77%. Citigroup won the $100 million of Series 2016A revenue bonds with a TIC of 2.53%. Both sales are rated triple-A by Moody's Investors Service and Standard & Poor's.
Boston sold $148.11 million of bonds in two sales. Citigroup won the $140 million of Series 2016A GOs with a true interest cost of 2.26%. BAML won the $8.11 million of Series 2016B GO refunding bonds with a TIC of 2.10%. Both sales are rated triple-A by Moody's and S&P.
Alaska competitively sold $134.79 million of Series 2016A GOs. BAML won the deal with a TIC of 3.02%. The bonds are rated Aa1 by Moody's, AA-plus by S&P and triple-A by Fitch.
Lancaster, Pa., competitively sold $125.8 million of Series 2016 GO combined purpose bonds. Morgan Stanley won the issue with a TIC of 3.497%. The bonds are rated A1 by Moody's.
Bond Buyer Visible Supply
The Bond Buyer's 30-day visible supply calendar rose $2.05 billion to $9.61 billion on Friday. The total is comprised of $2.50 billion of competitive sales and $7.12 billion of negotiated deals.
The Week's Most Actively Quoted Issues
California, Kentucky and Ohio issues were among some of the most actively quoted names in the week ended March 11, according to data released by Markit.
On the bid side, the California taxable 7.55s of 2039 were quoted by nine unique dealers. On the ask side, the Kenton County School District Financing Corp., Ky., revenue 3s of 2026 were quoted by 16 unique dealers. And among two-sided quotes, Ohio State University taxable 3.798s of 2046 were quoted by nine dealers.
The Week's Most Actively Traded Issues
Some of the most actively traded issues by type in the week ended March 11 were in California and Ohio, according to
In the GO bond sector, the California 5s of 2045 traded 143 times. In the revenue bond sector, the Los Angeles County Public Works Financing Authority 4s of 2040 traded 80 times. And in the taxable bond sector, the Ohio State University 3.798s of 2046 traded 30 times, Markit said.
Muni Bond Funds See Inflows for 23rd Straight Week
Municipal bond funds reported inflows for the 23rd straight week, according to Lipper data released on Thursday. Weekly reporting funds saw $518.253 million of inflows in the week ended March 9, after inflows of $212.255 million in the previous week, Lipper said.
The four-week moving average remained positive at $523.966 million after being in the green at $629.577 million in the previous week. A moving average is an analytical tool used to smooth out price changes by filtering out fluctuations.
Long-term muni bond funds also experienced inflows, gaining $276.208 million in the latest week after inflows of $202.928 million in the previous week. Intermediate-term funds had inflows of $201.549 million after inflows of $143.242 million in the prior week.
National funds saw inflows of $492.834 million after inflows of $128.892 million in the prior week. High-yield muni funds reported inflows of $151.240 million in the latest reporting week, after inflows of $27.310 million the previous week.
Exchange traded funds saw inflows of $67.895 million, after inflows of $87.289 million in the previous week.
