Prices of top-quality municipal bonds closed flat to slightly weaker on Monday, traders said, with yields on some maturities rising one basis point, as the muni market prepared for what will be a busy week. Issues on the calendar include three billion-dollar deals, led by a closely watched sale from Chicago.
Secondary Market
On Monday, the yield on the 10-year benchmark muni general obligation at close was up one basis point to 2.33% from 2.32% on Friday, while the yield on the 30-year GO was unchanged from 3.31%, according to a final read of Municipal Market Data's triple-A scale.
The 10-year muni to Treasury ratio was calculated on Monday at 96.2% versus 96.0% on Friday, while the 30-year muni to Treasury ratio stood at 103.3% compared to 103.2%, according to MMD.
Treasury prices were weaker at close on Monday, with the yield on the two-year Treasury note rising to 0.67% from 0.65% on Friday, while the 10-year yield rose to 2.43% from 2.42% and the 30-year yield was higher at 3.21% from 3.20%.
Primary Market
Municipal volume is projected to jump back over $8 billion this week, led by deals from Chicago, Indiana and California. Though the larger deals won't be priced until Wednesday and Thursday, the action is expected to get started on Tuesday.
The city of San Antonio, Texas is expected to come to market with $317.705 million of electric and gas systems revenue refunding bonds, Series 2015 on Tuesday. The bonds will be priced by Goldman, Sachs and are rated Aa1 by Moody's Investors Service, AA by Standard and Poor's and AA-plus by Fitch Ratings.
Citi is scheduled to price the Arizona School Facilities Board's $258 million of refunding certificates of participation on Tuesday. The COPs are expected to mature serially from 2016-2023 and are rated triple-A by both Moody's and S&P.
Later in the week, Chicago's $1.07 billion of general obligation bonds are set to be sold in a transaction the city has said will eliminate liquidity risks on its general fund stemming from the May 12 loss of its investment grade rating from Moody's Investors Service.
The deal is expected to be priced by Morgan Stanley on Thursday; the sale includes $344 million of Series 2015A tax-exempts and $730 million of Series 2015B taxables, with much of the sale moving short-term debt into a longer, fixed-rate term with capitalized interest for two and a half years. The deal offers of a mix of serial and term bonds with a final 2042 maturity. The debt is rated BBB-plus by S&P and Fitch Ratings and A-minus by Kroll Bond Rating Agency.
Piper Jaffray is slated to price the Montgomery Independent School District’s $245.275 million of unlimited tax building and refunding bonds on Tuesday. This deal by the Texas ISD is backed by the permanent school fund guarantee program and is rated triple-A by both Moody’s and S&P.
Also on docket, Bank of America Merrill Lynch is slated to price the Indiana Toll Road ITR Concession Co.'s $1 billion of senior secured notes on Wednesday, only months after the original private operator of the publicly owned toll road went bankrupt.
JPMorgan is expected to price on Wednesday the California State University Trustees' $1.1 billion of systemwide revenue bonds consisting of $1.07 million Series 2015A tax-exempts, due 2015-2014, and $30 million of Series 2015B taxable, due 2016-2035. The bonds are rated Aa2 by Moody's and AA-minus by S&P.
Prior Week's Actively Traded Issues by Sector
Revenue bonds comprised 55.05% of new issuance in the week ended July 10, down from 55.47% in the previous week, according to Markit. General obligation bonds comprised 35.58% of total issuance, down from 36.74%, while taxable bonds made up 9.37%, up from 7.79%.
Some of the most actively traded issues in the week ended July 10 were in Puerto Rico, Texas and Oregon.
In the revenue bond sector, the Corpus Christi utility systems' 4 1/8 of 2045 were traded 37 times. In the GO bond sector, the Puerto Rico commonwealth 8s of 2035 were traded 86 times. And in the taxable bond sector, the Oregon health sciences university revenue 5s of 2045 were traded 26 times, according to Markit.
