Municipal bond traders are waiting for the California State University deal to price for institutions on Wednesday while a highly rated Maryland issuer is selling bonds in the competitive arena.
Secondary Trading
U.S. Treasuries were mixed on Wednesday. The yield on the two-year Treasury dipped to 0.78% from 0.79% on Tuesday, while the 10-year Treasury yield was unchanged from 1.82% and the 30-year Treasury bond yield rose to 2.63% from 2.61%.
Top-rated munis closed stronger on Tuesday. The yield on the 10-year benchmark muni general obligation fell four basis points to 1.78% from 1.82% on Monday, while the 30-year muni yield dropped three basis points to 2.73% from 2.76%, according to a final read of Municipal Market Data's triple-A scale.
The 10-year muni to Treasury ratio was calculated on Tuesday at 98.2% compared with 97.4% on Monday, while the 30-year muni to Treasury ratio stood at 104.7% versus 104.4%, according to MMD.
MSRB Previous Session's Activity
The Municipal Securities Rulemaking Board reported 38,996 trades on Tuesday on volume of $10.79 billion.
Primary Market
Barclays Capital is set to price California State University's $1.34 billion of Series 2016 A & B revenue bonds for institutional investors on Monday after holding a one-day retail order period.
The $1.1 billion of Series 2016A bonds was priced for retail to yield from 0.62% with a 2% coupon in 2017 to 3.37% with a 3.25% coupon and 3.17% with a 4% coupon in a split 2037 maturity. A split term bond in 2045 was priced to yield 3.33% with a 4% coupon and 2.98% with a 5% coupon. No retail orders were taken in the 2029-2032, 2034, 2035 or 2041 maturities.
The $50 million of Series B-1 was priced as a split maturity in 2047: half was not offered to retail while the other half was priced as 3s to yield 1.15%. The $100 million of Series B-2 was priced as a split maturity in 2049: half was not offered to retail while the other half was priced as 4s to yield 1.50%. The $100 million of Series B-3 was priced as a split maturity in 2051: half was not offered to retail while the other half was priced as 4s to yield 1.88%.
The bonds are rated Aa2 by Moody's Investors Service.
Since 2006, Cal State has sold about $6 billion of bonds, with the largest issuance occurring last year when it issued $1.1 billion of bonds. The trustees sold a low amount of $309 million in 2013. The CSU is composed of 23 campuses and eight off campus centers and is the largest four-year public university system in the United States.
In the competitive arena on Wednesday, Anne Arundel County, Md., is selling two issues totaling $285.13 million.
The county will offer $145.35 million of general obligation refunding Series 2016 consolidated general improvements and consolidated water and sewer bonds and $139.78 million of Series 2016 GO consolidated general improvements and consolidated water and sewer bonds.
The issues are rated Aa1 by Moody’s and triple-A by Standard & Poor’s.
Morgan Stanley is expected to price the Pennsylvania Turnpike Commission’s $204.69 million of Series 2016A subordinated revenue bonds on Wednesday. The deal is rated A3 by Moody’s.
Bond Buyer Visible Supply
The Bond Buyer's 30-day visible supply calendar fell $1.66 billion to $8.25 billion on Wednesday. The total is comprised of $2.15 billion of competitive sales and $6.09 billion of negotiated deals.
Yellen: External Threats to U.S. Economy Pose Real Risks
Risks to the U.S. economy from a global economic slowdown are significant and have risen since last year, Federal Reserve Board Chair Janet L. Yellen told the Economic Club of New York on Tuesday.
Answering a question from former Fed Vice Chair Alan Blinder, Yellen said that while the U.S. economy has proven remarkably resilient, the pace of global growth and the prospects for oil prices will have direct and indirect effects on the economy. This may be seen through slower export growth, with financial market concerns that tends to mean a stronger dollar and lower equity prices. These heightened risks do have implications for the U.S. economy, she said.
Yellen noted, however, while the global economic situation poses risks, the net balance of risk was not all to the downside. She said the effects of a global slowdown would be cushioned because of an easing in financial market conditions that has come about because longer-term Treasury yields are down about 40 basis points since September, and because the FOMC has indicated that its sees as a main scenario a slightly more gradual pace of rate increases.
In her address, Yellen said she considered it appropriate for the Fed to move cautiously in adjusting monetary policy and advocated a gradual path to rising interest rates.
