Prices of top-rated municipal bonds were lower at mid-session, according to traders, with yields on some maturities rising by as much as four basis points.
Meanwhile, the municipal bond market is set to see more new issues come to market on Tuesday, led by the institutional pricing of Connecticut's $500 million of general obligation bonds.
Secondary Market
At midday, the yield on the 10-year benchmark muni general obligation was up two to four basis points from 2.22% on Monday, while the yield on the 30-year GO was up two to four basis points from 3.18%, according to a read of Municipal Market Data's triple-A scale.
Treasury prices were mostly lower on Tuesday as the yield on the two-year Treasury note was unchanged at 0.60% from Monday, while the 10-year yield rose to 2.25% from 2.24% and the 30-year yield increased to 3.02% from 3.01%.
The 10-year muni to Treasury ratio was calculated on Monday at 97.8% versus 101.7% on Friday, while the 30-year muni to Treasury ratio stood at 104.8% compared to 108.0%, according to MMD.
Primary Market
Siebert Brandford Shank is scheduled to price Connecticut's $500 million of Series 2015B general obligation bonds for institutions. A retail order period was held on Monday. The GOs were priced for retail to yield from 1.11% with 2% and 4% coupons in a split 2018 maturity to 3.74% with a 4% coupon in 2035. The 2016 and 2017 maturities were offered as sealed bids.
The bonds are rated Aa3 by Moody's Investors Service and AA by Standard & Poor's and Fitch Ratings. Moody's has a stable outlook on the bonds while S&P and Fitch assign negative outlooks.
The Constitution State is back in the market again next week, with $480 million of Series 2015C SIFMA-indexed bonds, giving the state total issuance of $980 million in a two-week span.
"For this particular sale, we have carved $25 million per year from the 2015 Series B bonds during the first 10 years of principal amortization, which will then be matched with $25 million per year amortization for the same time period with the 2015 Series C SIFMA-index bonds," said Sarah K. Sanders, assistant treasurer for debt management in the Connecticut State Treasurer's office. "These are the maturities which are most popular for SIFMA-indexed bond investors."
Sanders noted this approach also provides the state the ability to maximize the retail order period on the fixed-rate bond sale and it plans to adjust the amortization schedule, if needed, between the two sales for the first 10 years to fill all retail orders within the maturity limits.
"Selling the fixed-rate bonds first and the SIFMA-indexed bonds the following week allows this strategy to work well," she added.
Since 1995, Connecticut has issued over $34 billion of GOs. The years that saw the most issuance were 2008 and 2014, when $3.62 billion and $2.55 billion were sold, respectively. The least amount of issuance was in 1997 and 1999, when $636.8 million and $775 million were sold, respectively.
On Tuesday, Goldman is slated to price Austin, Texas' $404 million of electric utility system revenue refunding bonds. The issue is expected to consist of $323 million of tax-exempts and $81 million of taxable. The bonds are rated A1 by Moody's and AA-minus by S&P and Fitch.
Also on Tuesday, Frost Bank is set to price the San Antonio Independent School District, Texas' $307.44 million of Series 2015 unlimited tax school building and refunding bonds. The bonds, which are backed by the Permanent School Fund guarantee program, are rated triple-A by Moody's and Fitch.
Bank of America Merrill Lynch priced the Illinois Finance Authority's $129.54 million of Series 1015 revenue bonds for Northwestern University. The bonds were priced to yield from 1.99% with a 5% coupon in 2022 to 3.07% with 5% and 3% coupons in a split 2028 maturity. The issue is rated triple-A by Moody's, S&P and Fitch.
Bond Buyer Visible Supply
The Bond Buyer's 30-day visible supply calendar increased $463.6 million to $14.781 billion on Tuesday. The total is comprised of $4.687 billion competitive sales and $10.093 billion of negotiated deals.
MSRB Previous Session's Activity
The Municipal Securities Rulemaking Board reported 38,204 trades on Monday on volume of $7.796 billion.
The most active bond, based on the number of trades, was the New Mexico Hospital Equipment Loan Council's hospital system revenue bonds for Presbyterian Healthcare Services, Series 2015A 4 1/4s of 2044, which traded 274 times at an average price of 100.402 with an average yield of 4.064%. The bonds were initially priced at 97.587 to yield 4.27%.
