Prices of top-shelf municipal bonds finished stronger on Thursday, according to traders, with yields on some maturities falling by as much as four basis points.
In the primary, the last big deal of the week came to market with the institutional pricing of the New York Metropolitan Transportation Authority's transportation revenue refunding bonds.
Siebert Brandford Shank priced the N.Y. MTA's $419.71 million of Series 2015C bonds after a one-day retail order period.
The $344.01 million of Subseries 2015C-1 fixed-rates were priced to yield from 2.73% with a 5% coupon in 2025 to 3.33% with a 5% coupon and 3.25% with a 5.25% coupon in a split 2031 maturity; a split 2034 maturity was priced as 5s to yield 3.46% and as 3.70s to yield 3.73%; a 2035 maturity was priced as 5s to yield 3.50%.
The $75.70 million of Subseries 2015C-2 fixed-rate mandatory tender bonds were priced as 4s to yield 1.75% in a 2033 bullet maturity with a mandatory tender maturity date of 2020.
Morgan Stanley was co-manager with Bank of America Merrill Lynch, JPMorgan Securities and Ramirez as co-senior managers. Orrick, Herrington & Sutcliffe and Bryant Rabbino were co-bond counsel. Public Financial Management was the financial advisor and Hawkins Delafield & Wood was special disclosure counsel.
The issue was rated A1 by Moody's Investors Service, AA-minus by Standard & Poor's, A by Fitch Ratings and AA-plus by Kroll Bond Rating Agency. All four rating agencies maintain a stable outlook on the credit.
The deal was the first for the MTA since Moody's raised its rating to A1 from A2 on July 10. The MTA has about $35 billion of debt outstanding.
Raymond James received the official award on Lafayette, La.'s $91.60 million of Series 2015 communications system revenue refunding bonds.
The issue was priced to yield from 0.61% with a 2% coupon in 2016 to 3.87% with a 3.75% coupon. The bonds were insured by Assured Guaranty Municipal Corp. and rated A2 by Moody's and AA by S&P.
Secondary Market
The yield on the 10-year benchmark muni general obligation on Thursday closed off three basis points to 2.21% from 2.24% on Wednesday, while the yield on the 30-year GO was down four basis points to 3.16% from 3.20%, according to the final read of Municipal Market Data's triple-A scale.
Treasury prices were higher on Thursday, with the yield on the two-year Treasury note dropping to 0.69% from 0.70% on Wednesday, while the 10-year yield declined to 2.28% from 2.32% and the 30-year yield decreased to 2.98% from 3.04%.
The 10-year muni to Treasury ratio was calculated on Thursday at 97.2% versus 96.6% on Wednesday, while the 30-year muni to Treasury ratio stood at 106.3% compared to 105.4%, according to MMD.
Puerto Rico Electric Power Authority bonds gained in light trading on reports that bondholders and the authority are proposing an $8.1 billion debt exchange that would delay payments for several years and give the junk-rated agency $2.5 billion to upgrade power systems.
On Thursday, one of the more actively traded issues, the PREPA 2010 Series XX 5 1/4s of 2035 saw wide trading, according to the Municipal Rulemaking Board's EMMA website.
The 5 1/4s traded between 53.808 and 59 cents on the dollar, with yields of between 10.05% and 11.019%, according to EMMA. There were 20 trades totaling $1.80 million. On Wednesday, the 5s were trading between 51.115 and 52.004 cents on the dollar, with yields ranging from 11.456% to 11.583%, in four trades totaling $750,000.
The PREPA 2008 Series WW 5s of 2028 on Thursday saw wide trading, between 50.878 and 59 cents on the dollar, with yields of between 11.023% and 12.91%, according to EMMA. There were 15 trades totaling $3.09 million. On Wednesday, the 5s were trading between 49.434 and 52, with yields ranging from 12.625% to 13.289%, in five trades totaling $390,000.
The PREPA 2010 Series ZZ 5s of 2018 on Thursday were trading between 48.807 and 49.557 cents on the dollar, with yields of between 33.133% and 33.797%, according to EMMA. There were four trades totaling $40,000. The previous trades were on July 14, when the 5s traded between 46.058 and 47.058, with yields ranging from 35.234% to 36.177%, in three trades totaling $30,000.
U.S. Bank Wealth Management: Bullish on Munis
This week's volume of around $9 billion might be the peak of weekly issuance for the remainder of the year, Dan Heckman, senior fixed income strategist at U.S. Bank Wealth Management, told The Bond Buyer.
"There might be another week or two of issuers trying to scramble and get ahead of an impending rate hike, but I think somewhere in the $5 billion to $6 billion range might become the norm; as refundings likely have begun to ebb here and we will see that play out in a stronger fashion," he said in a phone interview.
He also said barring a major and continued outflows, the market fundamentally is in good shape.
"Tax receipts are coming in very strong and some of the states are trying to figure out how to spend the extra money, they may use cash versus issuing additional debt but we are bullish for the rest of the year rather than bearish."
Heckman thought all along that September could be a good time frame for a rate hike, but notes his one concern about the Fed is whether they wait too long.
"If that ends up happening, then they are left at a position of weakness with fewer levers to pull. It might be in the best interest to make a move sooner rather than later. The move will be gradual in nature, lower and slower," he said. "All in all the Fed would prefer to get off zero but they need to get into a situation where they are comfortable doing that. Inflation is starting to perk up, there is more of a case to raise rates than to not."
Tax-Exempt Money Market Funds Post Inflows
Tax-exempt money market funds experienced inflows of $346.9 million, bringing total net assets to $246.83 billion in the period ended July 20, according to The Money Fund Report, a service of iMoneyNet.com. This followed an outflow of $743.4 million to $246.48 billion in the previous week.
The average, seven-day simple yield for the 392 weekly reporting tax-exempt funds remained at 0.01% for a 116th straight week.
The total net assets of the 987 weekly reporting taxable money funds rose $29.44 billion to $2.428 trillion in the period ended July 21, after experiencing an outflow of $3.93 billion to $2.399 trillion in the prior week.
The average, seven-day simple yield for the taxable money funds remained at 0.02% for the 27th consecutive week.
Overall, the combined total net assets of the 1,379 weekly reporting money funds increased $29.78 billion to $2.675 trillion in the period ended July 14, which followed an outflow of $4.67 billion to $2.645 trillion the week before.
