Prices of top-rated municipal bonds ended stronger on Tuesday, according to traders, with yields dropping by as much as three basis points.
Traders kept wary eye on the Federal Reserve as policy makers gathered for a meeting to decide the course of interest rates. The states of Tennessee, Texas and Florida all came to market on Tuesday ahead of the Fed decision.
Secondary Market
The yield on the 10-year benchmark muni general obligation finished three basis points weaker at 2.00% from 2.03% on Monday, while the yield on the 30-year GO was three basis points softer at 3.03% from 3.06%, according to the final read of Municipal Market Data's triple-A scale.
Treasury prices were higher on Tuesday, with the yield on the two-year Treasury slipping to 0.61% from 0.63% on Monday, while the 10-year yield fell to 2.02% from 2.06% and the 30-year yield decreased to 2.84% from 2.86%.
The 10-year muni to Treasury ratio was calculated on Tuesday at 98.8% the same as on Monday, while the 30-year muni to Treasury ratio stood at 106.4% compared with 106.7%, according to MMD.
Primary Market
Morgan Stanley priced and repriced the state of Tennessee’s $385.59 million of Series 2015A general obligation bonds and Series 2015B refunding bonds for institutions after a one-day retail order period on Monday.
The $287.77 million of Series 2015A bonds were priced to yield from 0.20% with a 2% coupon in 2016 to 2.80% with a 5% coupon in 2035.
The $97.83 million of Series 2015B bonds were priced as 5s to yield 0.08% in 2016 and to yield from 0.72% with a 4% coupon in 2018 to 1.53% with a 5% coupon in 2022; and from 1.90% with a 5% coupon in 2024 to 2.54% with a 4% coupon in 2028.
The issue was rated triple-A by Moody’s Investors Service and Fitch Ratings and AA-plus by Standard & Poor’s.
Jefferies priced and repriced the state of Texas’ $234.97 million of Series 2015D GOs and water financial assistance bonds on Tuesday.
The bonds were priced to yield from 1.43% with a 5% coupon in 2021 to 3.07% with a 5% coupon in 2037; a 2040 maturity was priced as 5s to yield 3.17% and a 2045 maturity was priced as 4s to yield 3.65%.
The issue was rated triple-A by Moody’s, S&P and Fitch.
Since 2005, the Lone Star State has issued about $4 billion of debt, with the most issuance occurring in 2011 and 2013 when it sold $599 million and $641 million respectively. The state sold the least in 2005 and 2014 when it issued $247 million and $150 million of bonds, respectively.
In the competitive arena, the state of Florida Board of Education sold $233.14 million of its full faith and credit Series 2015F public education capital outlay refunding bonds.
Citigroup won the issue with a dollar bid of 111.63 and a true interest cost of 2.97%. The bonds, due June 1, were priced to yield from 0.47% with a 5% coupon in 2017 to 3.32% with a 4% coupon in 2036.
The issue was rated Aa1 by Moody’s and triple-A by S&P and Fitch.
Most of the rest of the week’s issuance will take place on Thursday, after the Federal Open Market Committee’s policy statement is released on Wednesday afternoon.
Most economists expect the Fed to refrain from raising interest rates at this week’s meeting, although there remains some question as to whether the Fed will hike in December.
