Muni market sees more supply as California sells GO bonds

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Municipal bond buyers saw more volume hit the market on Wednesday as California sold nearly $900 million of bonds.

Primary market
In the competitive arena, California sold $866 million of general obligation bonds consisting of $445 million of Bid Group A various purpose GOs and $421.02 million of Bid Group B various purpose GOs.

Morgan Stanley won the Bid Group A GOs with a true interest cost of 3.6994% while Bank of America Merrill Lynch won the Bid Group B GOs with a TIC of 2.8478%.

Proceeds will be used to finance certain capital improvements and to refund GO commercial paper notes.

The financial advisor is Public Resources Advisory Group; the bound counsel is Orrick Herrington.

The deal is rated Aa3 by Moody’s Investors Service and AA-minus by S&P Global Ratings and Fitch Ratings.

Since 2008, the Golden State has sold about $97 billion of bonds, with the most issuance occurring in 2009 when is issued around $23 billion. It sold the least amount of bonds in 2011 when it issued roughly $4.9 billion.
The South Broward Hospital District, Fla., sold $100 million of Series 2018 hospital revenue bonds.

Bank of America Merrill Lynch won the bonds with a TIC of 4.2646%.

The financial advisor is Ponder & Co.; the bond counsel is Greenberg Traurig.

Proceeds will be used for the cost of acquiring, constructing and equipping certain of the district’s healthcare facilities.

The deal is rated Aa3 by Moody’s and AA by S&P.

In the negotiated sector, RBC Capital Markets priced the New Jersey Economic Development Authority’s $300 million of Series 2017B state lease revenue bonds for the State House project as a remarketing.

The deal is rated Baa1 by Moody’s, BBB-plus by S&P and A-minus by Fitch except for the 2039 maturity which is insured by Build America Mutual and rated AA by S&P.

Morgan Stanley priced Sacramento, Calif.’s $261.57 million of Series 2018 transient occupancy tax revenue bonds consisting of Senior Series A TOT bonds and Subordinate Series C TOT bonds.

The senior series bonds are rated A1 by Moody’s while the subordinate bonds are rated A2 by Moody’s

Wells Fargo securities priced the Cypress-Fairbanks Independent School District, Texas’ $188.31 million of Series 2018 unlimited tax school building bonds.

The deal, which is backed by the Permanent School Fund guarantee program, is rated triple-A by Moody’s and S&P.

Wednesday’s bond sales

California
Click here for the state's $421M sale

Click here for the Sacramento pricing

Florida
Click here for the South Broward sale

New Jersey
Click here for the EDA pricing

Texas
Click here for the Cypress-Fairbanks pricing

Bond Buyer 30-day visible supply at $11.67B
The Bond Buyer's 30-day visible supply calendar decreased $1.60 billion to $11.67 billion for Wednesday. The total is comprised of $3.57 billion of competitive sales and $8.10 billion of negotiated deals.

Secondary market
Municipal bonds were stronger on Wednesday, according to a midday read of the MBIS benchmark scale. Benchmark muni yields fell as much as one basis point in the one- to 30-year maturities.

High-grade munis were also stronger, with yields calculated on MBIS' AAA scale declining as much as three basis points across the curve.

Municipals were stronger on Municipal Market Data’s AAA benchmark scale, which showed the yield on both the 10-year muni general obligation and the yield on 30-year muni maturity falling by as much as one basis point.

Treasury bonds were stronger as stocks traded lower.

On Tuesday, the 10-year muni-to-Treasury ratio was calculated at 86.6% while the 30-year muni-to-Treasury ratio stood at 102.2%, 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.

“The municipal market is bifurcating a little bit today. The high-yield sector is running counter to the high-grade sector. Yields are higher in high-yield, while high-grade yields are lower,” ICE Data Services said in a late market comment Tuesday. “The minor movement in high-grade sector is 0.01 basis points lower in yield at the longer end of the curve, while high yield is 0.01 basis points broadly higher along the curve. Taxable yields are 0.5 basis points lower at the longer end of the curve (30-year) while they are 0.6 basis points higher at the short end (two-year).”

Previous session's activity
The Municipal Securities Rulemaking Board reported 44,985 trades on Tuesday on volume of $12.70 billion.

California, New York and Texas were the municipalities with the most trades, with the Golden State taking 15.856% of the market, the Empire State taking 14.343% and the Lone Star State taking 10.081%.

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 Ziad Saba at 212-803-6079 for more information.

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Primary bond market Secondary bond market State of California New Jersey Economic Development Authority School Board of Broward County, FL State of Texas State of New York City of Sacramento, CA
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