The municipal bond market on Thursday will be preparing to take on the last of the week's big new issues as traders keep one eye on world news and the other on Treasury yields.
Secondary Trading
Treasury prices were mostly lower on Thursday, with the yield on the two-year Treasury note rising to 0.71% from 0.65% on Wednesday, while the 10-year yield rose to 2.18% from 2.13% and the 30-year yield increased to 2.85% from 2.82%.
The yield on the 10-year benchmark muni general obligation on Wednesday closed down one basis point to 2.17% from 2.18% on Tuesday, while the yield on the 30-year GO was unchanged from 3.06%, 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 101.8% versus 99.4% on Tuesday, while the 30-year muni to Treasury ratio stood at 108.5% compared to 108.4%, according to MMD.
Primary Market
On Thursday, Wells Fargo Securities is scheduled to price Charlotte, N.C.'s $475 million of water and sewer revenue bonds. The issue is rated triple-A by Moody's, S&P and Fitch.
Charlotte said it believes the offering is the largest single deal the city has ever issued. The city may benefit from recent global economic news, which has been pushing interest rates down.
The timing of this week's pricing is favorable for the city after a rise in Treasuries eroded the savings potential for some muni refundings in May and June, according to Matt Buscone, a senior vice president and portfolio manager at Boston-based Breckinridge Capital Advisors.
While investors are still searching for credits with a little more spread, he said there typically is a lot of demand for paper from North Carolina. Charlotte's transaction will price a little more aggressively because the bonds have the highest ratings, Buscone said.
Since 1995, Charlotte has issued roughly $8.59 billion of debt. The highest years of issuance occurred in 2008 and 2009, as the city issued $602 million and $1.13 billion, respectively. The city saw low years of issuance in 1995 and 1997, when it issued just $162 million and $75 million, respectively.
Wells Fargo is also expected to price Santa Clara University, Calif.'s $110 million of bonds. The issue is rated Aa3 by Moody's.
And Goldman, Sachs is set to price $381.71 million of hospital refunding revenue bonds, Series 2015 for the Children's Hospital Obligated Group Issue in Washington, D.C.
Tax-Exempt Money Market Funds Post Inflows
Tax-exempt money market funds experienced inflows of $2.15 billion, bringing total net assets to $247.94 billion in the period ended Aug. 10, according to The Money Fund Report, a service of iMoneyNet.com. This followed an inflow of $370.2 million to $245.79 billion in the previous week.
The average, seven-day simple yield for the 384 weekly reporting tax-exempt funds remained at 0.01% for the 119th straight week.
The total net assets of the 966 weekly reporting taxable money funds rose $361.1 million to $2.446 trillion in the period ended Aug. 11, after experiencing an inflow of $23.54 billion to $2.446 trillion in the prior week.
The average, seven-day simple yield for the taxable money funds remained at 0.02% for the 30th week.
Overall, the combined total net assets of the 1,350 weekly reporting money funds increased $2.51 billion to $2.694 trillion in the period ended Aug. 11, which followed an inflow of $23.91 billion to $2.692 trillion the week before.
MSRB Previous Session's Activity
The Municipal Securities Rulemaking Board reported 39,879 trades on Wednesday on volume of $8.595 billion.
Bond Buyer Visible Supply
The Bond Buyer's 30-day visible supply calendar fell $955 million to $7.43 billion on Thursday. The total is comprised of $3.27 billion competitive sales and $4.17 billion of negotiated deals.
Shelly Sigo contributed to this report.
