Prices of top-quality municipal bonds closed slightly stronger on Monday, according to traders, with yields weakening by as much as one basis point.
In the primary, traders were preparing for the start of the week’s issuance, which is divided up into pre- and post-FOMC action.
Secondary Market
The yield on the 10-year benchmark muni general obligation was one basis point weaker at 2.03% from 2.04% on Friday, while the yield on the 30-year GO was one basis point softer at 3.06% from 3.07%, according to the final read of Municipal Market Data's triple-A scale.
Treasury prices were higher on Monday, with the yield on the two-year Treasury slipping to 0.63% from 0.64% on Friday, while the 10-year yield declined to 2.06% from 2.08% and the 30-year yield decreased to 2.86% from 2.89%.
The 10-year muni to Treasury ratio was calculated on Monday at 98.6% versus 98.2% on Friday, while the 30-year muni to Treasury ratio stood at 106.7% compared to 106.1%, according to MMD.
Primary Market
In the primary, municipal bond traders will see about $5.1 billion of new issue supply hit the market this week, according to Ipreo and The Bond Buyer. The volume will consist of $4.0 billion of negotiated deals and $1.1 billion of competitive sales.
Morgan Stanley priced the state of Tennessee’s $384.28 million of Series 2015A general obligation bonds and Series 2015B refunding bonds for retail investors with the institutional pricing set for Tuesday.
The $288 million of Series 2015A bonds were priced for retail to yield from 0.53% with a 4% coupon in 2017 to 2.91% with a 5% coupon in 2035; a 2016 maturity was offered as a sealed bid. The $96.28 million of Series 2015B bonds were not offered to retail.
The issue is rated triple-A by Moody’s Investors Service and Fitch Ratings and AA-plus by S&P.
Tennessee’s annual GO offering will finance capital needs and the timing for the sale was strategic, a state official told The Bond Buyer, with the sale set ahead of the Federal Open Market Committee’s monetary policy meeting on Tuesday and Wednesday.
Jefferies is set to price the state of Texas’ $223 million of Series 2015D GOs and water financial assistance bonds on Tuesday. The issue is rated triple-A by Moody’s, S&P and Fitch.
Morgan Stanley is also expected to price the Marin County Healthcare District, Calif.’s $170 million issue on Tuesday. The bonds are rated Aa2 by Moody’s.
The state of Florida will competitively sell $230 million of full faith and credit Board of Education Series 2015F public education capital outlay refunding bonds on Tuesday. The bonds are 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 FOMC statement on Wednesday afternoon. Most economists doubt policy makers will raise interest rates at this week’s meeting. They are divided as to whether the Fed will do so in December.
Raymond James is slated to price the Broward County Airport Authority, Fla.’s $489 million of airport revenue bonds for the Fort Lauderdale International Airport on Thursday.
The issue will consist of Series A and C bonds subject to the alternative minimum tax and Series B non-AMT bonds. The deal is tentatively structured as serials maturing from 2016 to 2035 with term bonds in 2040 and 2045.
The bonds are rated A1 by Moody’s Investors Service and A-plus by Standard & Poor’s.
Bank of America Merrill Lynch is expected to price the Washington Township HealthCare District, Calif.’s $146 million of Series 2015B 2012 Election GOs on Thursday.
Siebert Brandford Shank is set to price Harris County, Texas’ $145 million of Series 2015B toll road senior lien revenue refunding bonds on Thursday.
BAML is expected to price the California Pollution Control financing Authority’s $126 million of solid waste disposal refunding revenue bonds for Waste Management Inc. on Thursday. The issue is rated A-minus by S&P.
And Wells Fargo Securities is set to price the Virginia Housing Development Authority’s $101 million of taxable mortgage pass-through bonds on Thursday. The deal is rated triple-A by Moody’s and S&P.
In the competitive arena, the California State Public Works Board is selling $223 million of Series 2015H Department of Corrections and Rehabilitation lease revenue bonds for the Corcoran State Prison on Thursday. The issue is rated A1 by Moody’s, A-plus by S&P and A by Fitch. The bonds are tentatively structured to mature serially from 2016 to 2035.
Also on Thursday, Citigroup and Guggenheim Securities will remarket Posey County, Ind.’s $1.2 billion of Series 2013A revenue refunding bonds for the Midwest Fertilizer Co. The deal has been remarketed several times, the last being on March 27. It has a put date of Aug. 2, 2016. The issue is rated A1-plus by S&P.
One deal, however, that traders won’t see this week is the $1.4 billion sale from the Mission Economic Development Corp. in Texas.
The high-yield offering, which will used to back the Natgasoline methanol plant project, was moved onto next week’s calendar, according to a market source.
The deal will be priced by BAML and consists of $1.16 billion of Series 2015A taxable senior lien revenue bonds and $240 million of Series 2015B tax-exempt junior lien revenue bonds.
The preliminary official statement said the bonds have a significant degree of risk, are not being registered under the Securities Act, and are being offered under Rule 144A. Ratings are being applied for from S&P and Fitch.
Previous Week's Actively Traded Issues
Revenue bonds comprised 56.55% of new issuance in the week ended Oct. 23, down from 57.89% in the previous week, according to Markit. General obligation bonds comprised 35.44% of total issuance, up from 34.00%, while taxable bonds made up 8.01%, down from 8.11%.
Some of the most actively traded issues in the week were in New York, Puerto Rico and Florida, according to Markit.
In the revenue bond sector, the Utility Debt Securitization Authority, N.Y., LIPA 5s of 2036 were traded 81 times. In the GO bond sector, the Puerto Rico commonwealth GO 8s of 2035 were traded 44 times. And in the taxable bond sector, the Florida Hurricane Catastrophe Fund Finance Corp. 2.995s of 2020 were traded 14 times, Markit said.
