Muni buyers tap bond bonanza as D.C., S.F., N.C. sell
Bond buyers vied for volume on Wednesday as a bevy of deals priced in the primary.
Secondary action was muted, with munis little changed on a day that saw sales from the District of Columbia, San Francisco, and North Carolina.
Investor demand continued to fuel the market as the new issues and the secondary market benefited from July reinvestment season, according to one New York trader.
“It’s a strong market, especially on the front end,” he said Wednesday morning, noting the two-year municipal bond was yielding 59.7% of the comparable U.S. Treasury bond.
But aside from some follow through from two of the week’s largest new issues, the municipal market ended Wednesday on a lackluster note, according to a New Jersey trader.
He said before the close that there would be some “scrambling” for paper when the New Jersey Transportation Trust Fund Authority’s $1.21 billion of Series 2018A federal highway reimbursement revenue refunding notes were free to trade. The deal consists of tax-exempt GARVEE notes not subject to the alternative minimum tax and were priced by Morgan Stanley earlier in the week. The notes are rated Baa1 by Moody’s Investors Service, A-plus by S&P Global Ratings and A-minus by Fitch Ratings.
At the same time the New York City Transitional Finance Authority offering was “on the rich side” in follow-through trading, though he said the Street was accepting the levels due to the overall scarcity of volume.
“I think we are going to see a fair amount of TFAs in the dealers’ hands,” the New Jersey trader said.
Secondary trading is “deadsville,” he said. “It’s very very quiet; a lot of people on the retail side are sitting on their hands. You can’t image how inactive and quiet it is.
“The situation continues to be more bonds leave this market on a weekly basis than are coming in and that continues to shrink the market,” the trader continued.
The fear of interest rates rising is also curtailing activity, he said. “I’ve been doing this for over 30 years and I have never seen anything like this. Mom and pop keep hearing about rising interest rates, and it hasn’t translated into cheaper muni bonds, so no one wants to commit to this marketplace.”
Municipal investors are flush with reinvestment proceeds and eagerly looking for a place to reinvest their cash.
“There’s a ton of cash, and not a lot of bonds,” the New York trader said. “It’s very competitive in the new issue market, and in the secondary for bid-wanteds.”
Ramirez & Co. priced and repriced the District of Columbia’s $515.32 million of Series 2018A general obligation bonds and Series 2018B GO refunding bonds.
Last week, Washington, D.C.'s GOs received an upgrade to Aaa from Moody’s Investors Service. D.C. received GO rating upgrades to AA-plus from AA from both S&P Global Ratings and Fitch Ratings earlier in the month.
Since 2008, D.C. has sold almost $14 billion of bonds, with the most issuance occurring in 2008 when it sold $2.099 billion. Prior to this year, the District sold the least amount of bonds in 2014 when it issued $732.1 million.
JPMorgan Securities priced the City and County of San Francisco’s Public Utilities Commission’s $416.07 million of Series 2018B wastewater revenue bonds and Series 2018A green bonds.
The deal is rated Aa3 by Moody’s and AA by S&P.
Citigroup priced the City and County of San Francisco PUC’s $179.145 million of Series 2018C wastewater revenue green bonds.
The deal is rated Aa3 by Moody’s and AA by S&P.
Morgan Stanley priced the Fairfax County Industrial Development Authority, Va.’s $357.18 million of Series 2018A&B health care revenue bonds for the Inova health system.
The deal is rated Aa2 by Moody’s and AA-plus by S&P.
Wells Fargo Securities priced the Del Mar College District, Texas’ $101.04 million of Series 2018A&B limited tax bonds. The deal is rated Aa2 by Moody’s and AA-plus by Fitch.
Goldman Sachs priced the Metropolitan District of Hartford County, Conn.’s $110.77 million of Hos, issue of 2018. The deal is rated Aa3 by Moody’s and AA by S&P.
Siebert Cisneros Shank & Co. received the official award on Houston’s $569.11 million of Series 2018C airport system subordinate lien revenue refunding bonds, subject to the AMT and the Series 2018D non-AMT bonds on Tuesday. The deal is rated A1 by Moody’s and A by Fitch.
Jefferies received the written award on the Ohio Water Development Authority’s $166.41 million of fresh water Series 2018 water development revenue bonds. The deal is rated AAA by Moody’s and S&P.
In the competitive sector, North Carolina sold $400 million of Series 2018A general obligation public improvement bonds for Connect N.C.
Bank of America Merrill Lynch won the bonds with a true interest cost of 2.8649%.
The deal is rated triple-A by Moody’s, S&P and Fitch.
Click here for the D.C. repricing
Click here for the San Francisco pricing
Click here for the state sale
Click here for the Hartford County pricing
Bond Buyer 30-day visible supply at $7.6B
The Bond Buyer's 30-day visible supply calendar decreased $3.76 billion to $7.60 billion on Thursday. The total is comprised of $3.54 billion of competitive sales and $4.06 billion of negotiated deals.
Municipal bonds were mixed on Wednesday, according to a late read of the MBIS benchmark scale. Benchmark muni yields fell less than one basis point in the one- to eight-year, 11- to 14-year and 28- to 30-year maturities, rose less than a basis point in the 16- to 25-year maturities and remained unchanged in the nine- and 10-year, 15-year and 26- and 27-year maturities.
High-grade munis were also mixed, with yields calculated on MBIS’ AAA scale falling less than one basis point in the one- to 12-year and 27- to 30-year maturities, rising less than a basis point in the 15- to 23-year maturities and remaining unchanged in the 13- and 14-year and 24- and 25-year maturities.
Municipals were mixed on Municipal Market Data’s AAA benchmark scale, which showed both the 10-year muni general obligation yield and the yield on the 30-year muni maturity remaining unchanged.
Treasury bonds were weaker as stocks traded higher.
On Wednesday, the 10-year muni-to-Treasury ratio was calculated at 83.5% while the 30-year muni-to-Treasury ratio stood at 97.6%, according to MMD. The muni-to-Treasury ratio compares the yield of tax-exempt municipal bonds with the yield of taxable U.S. Treasury with comparable maturities. If the muni/Treasury ratio is above 100%, munis are yielding more than Treasury; if it is below 100%, munis are yielding less.
Previous session's activity
The Municipal Securities Rulemaking Board reported 40,663 trades on Tuesday on volume of $10.23 billion.
California, New York and Texas were the states with the most trades, with the Golden State taking 17.578% of the market, the Empire State taking 12.098% and the Lone Star State taking 11.287%.
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.