Municipal bond traders are set to see more supply hit the market on Tuesday, as they keep an eye on rising muni yields.
Secondary Market
U.S. Treasuries were weaker on Tuesday. The yield on the two-year Treasury rose to 0.67% from 0.66% on Monday as the 10-year Treasury yield gained to 1.49% from 1.43% and the yield on the 30-year Treasury bond increased to 2.22% from 2.15%.
Top-quality municipal bonds finished weaker on Monday. The yield on the 10-year benchmark muni general obligation rose two basis points to 1.33% from 1.31% on Friday, while the yield on the 30-year muni increased one basis point to 1.96% from 1.95%, according to the final read of Municipal Market Data's triple-A scale.
The 10-year muni to Treasury ratio was calculated at 93.0% on Monday compared to 96.0% on Friday, while the 30-year muni to Treasury ratio stood at 91.2% versus 92.51%, according to MMD.
MSRB: Previous Session's Activity
The Municipal Securities Rulemaking Board reported 30,430 trades on Monday on volume of $5.78 billion.
Primary Market
Siebert Brandford Shank is set to hold the second day of a retail order period for the New York City Transitional Finance Authority's $800 million of tax-exempt future tax secured subordinate Fiscal 2017 Subseries A-1 bonds. The institutional pricing is set for Wednesday.
The issue was priced on Monday for retail to yield from 0.69% with 4% and 5% coupons in a split 2019 maturity to 2.43% with a 4% coupon in 2042; no retail orders were taken in the 2030-2034, 2039 or 2041 maturities. A 2018 maturity was offered as a sealed bid.
The bonds are rated Aa1 by Moody's Investors Service and triple-A by S&P Global Ratings and Fitch Ratings; all three agencies have a stable outlook on the credit.
The TFA on Wednesday will competitively sell two separate taxable offerings totaling $250 million, consisting of $186.91 million of Fiscal 2017 Series A Subseries A-2 future tax secured bonds and $63.91 million of Fiscal 2017 Series A Subseries A-3 future tax secured bonds.
On Tuesday, JPMorgan Securities is expected to price the Louisville-Jefferson County Metropolitan Government, Ky.'s $538.05 million of Series 2016A health system revenue bonds for Norton Healthcare. The deal is rated A-minus by S&P and A by Fitch.
Ahead of the sale Fitch raised around $800 million in parity debt to A from A-minus based on the system's improving financial metrics and market share.
"Norton, headquartered in Louisville, operates five hospitals, seven outpatient centers, and 13 urgent care locations. Growth in patient volume is driving Norton to use bond proceeds for facilities expansion at its Women's and Children's hospitals and for a wide reaching energy initiative," Janney municipal credit analyst Eric Kazatsky wrote in a market comment on Monday. "Inpatient market share has grown to almost 51%, almost double its competition, while pediatric market share is 96%. Following challenging years in 2012-2013, Norton has improved margins, with ending fiscal 2015 operating margin at 4.9% and interim three month 2016 results of 5.8%; while liquidity has improved at $979 million, or 189 days cash on hand, liquidity is below national medians."
Since 2006, the Louisville-Jefferson County Metro Government Health System has issued about $2.6 billion of debt, with the largest issuance occurring in 2009 when it sold $482 million of securities.
JPMorgan is also set to price the Massachusetts Port Authority's $223.04 million issue on Tuesday. The offering consists of $50.995 million of Series 2016A revenue refunding bonds not subject to the alternative minimum tax and $172.04 million of Series 2016B revenue bonds subject to the AMT. The deal is rated Aa2 by Moody's and AA by S&P and Fitch.
In the competitive arena on Tuesday, Hillsborough County, Fla., will sell $213.13 million of Series 2016 utility revenue bonds. The deal, which was postponed from June 29, is rated triple-A by Moody's, AA-plus by S&P and triple-A by Fitch.
The county last competitively sold comparable bonds on Oct. 10, 2010, when Bank of America Merrill Lynch won $18.04 million of Series 2010A utility revenue bonds with a true interest cost of 2.09%.
Bond Buyer Visible Supply
The Bond Buyer's 30-day visible supply calendar increased $1.86 billion to $14.29 billion on Tuesday. The total is comprised of $4.65 billion of competitive sales and $9.64 billion of negotiated deals.
