Prices of top-shelf municipal bonds were lower at mid-session, according to traders, with yields of some maturities falling by as much as two basis points.
And while Chicago will delay its $380 million municipal bond market appearance until at least next week, traders are seeing a lot new issue supply come to market on Tuesday.
Primary Market
In the primary, Barclays Capital priced the New York City Municipal Water Finance Authority's $452.17 million of water and sewer system second general resolution revenue bonds, Fiscal 2015 Series HH for institutions.
The bonds were priced to yield from 2.55% with 4% and 5% coupons in a split 2025 maturity to 3.68% with a 3.50% coupon in 2032; a 2037 split maturity was priced as 3 3/4s to yield 3.86% and as 5s to yield 3.58%; a 2038 maturity was priced as 4s to yield 3.85%; and a 2039 maturity was priced as 5s to yield 3.64%. The issue is rated Aa2 by Moody's Investors Service and AA-plus by Standard & Poor's and Fitch Ratings.
Jefferies priced Miami-Dade County, Fla.'s $482.18 million of Series 2015 water and sewer system revenue refunding bonds. The bonds were priced to yield from 1.36% with a 5% coupon in 2018 to 3.11% with a 5% coupon in 2026. The deal is rated Aa3 by Moody's and A-plus by S&P and Fitch.
These bonds will be refunding portions of the 2007 bonds and 2008 C bonds, according to Frank Hinton, director of the division of bond administration, for Miami-Dade County.
"We initially issued bonds for the funding of projects," Hinton said. "The bonds are now reviewed for refunding opportunities and as long as the county's threshold of a 5% present-value savings is met, we will continue to come to market."
Hinton also said they need to do these refundings so they can save the county a projected average of $3.4 million a year in debt service.
"The expected average annual savings is important for the next series of bonds," he said. "We are aware of the needs and costs and these refundings will help us differ some of those costs."
Since 1997, Miami-Dade County has issued roughly $19.97 billion of debt. The lowest years of issuance occurred in 2000 and 2001, when the county only sold $162 million and $69 million, respectively. The years that saw the most issuance were 2008 and 2010, when they went to market with $2.01 billion and $2.38 billion, respectively.
Miami-Dade County has been no stranger to the muni market so far in 2015, as they have come with six issues totaling $815.7 million, not including Tuesday's deal. Since 1997, they have been coming to market an average of 6.4 times per year.
In the competitive arena, the Virginia Public Building Authority will sell $368.39 million of public facilities revenue bonds. Wells Fargo Securities won the issue with a true interest cost of 3.05%. No pricing information was immediately available. The bonds are rated Aa1 by Moody's and AA-plus by S&P and Fitch.
The last time the Virginia PBA sold bonds competitively was on Aug. 27, 2014, when Wells Fargo Securities won $29.74 million of Series 2014B taxable public facilities revenue bonds with a true interest cost of 3.23%.
Also on Tuesday, Atlantic City, N.J., is expected to be in the market with a $41 million bond sale — but in a deal that is backed by a state enhancement program. S&P rated the deal A-minus based on the state's Municipal Qualified Bond Act program. The city's GO debt is rated Caa1 by Moody's, while S&P rates the city BB.
Bank of America Merrill Lynch is slated to price the Series 2015A taxable GO refunding bonds under the state's MQBA, which is intended to facilitate distressed municipal issuers' access to the capital markets.
Elsewhere on Tuesday, Barclays Capital is slated to price the Port Authority of New York and New Jersey's $500 million of consolidated bonds, 191st Series. The issue is rated Aa3 by Moody's and AA-minus by S&P and Fitch.
Topping the calendar is a $1 billion revenue bond issue from Florida's Citizens Property Insurance Corp. A retail order period is scheduled for Tuesday, which is preliminarily structured as $750 million of fixed-rate bonds with five, seven, and 10-year maturities, and $250-million in three-year floating rate notes. The institutional pricing is slated for Wednesday. The issue is rated A1 by Moody's, A-plus by S&P and AA-minus by Fitch.
No-Go in Chicago
Chicago had intended as soon as Tuesday to remarket $182 million of 2003 general obligation paper and $201 million of 2002 bonds, converting them from floating rate to fixed. Siebert Brandford Shank & Co. LLC is senior manager on the 2003 bonds that currently reset weekly and Ramirez & Co. Inc. is senior manager on the 2002 bonds that reset daily.
The city remains on track to remarket all $800 million of its floating-rate GOs as fixed-rate by mid-June, officials said.
The four floating-to-fixed conversions are aimed at reducing the city's risks tied to bank credit support and easing liquidity pressure on Chicago now that banks are in position to demand up to $2.2 billion in debt repayment due to termination and default events triggered by Moody's Investors Service's downgrade of the city to junk.
Moody's cut $8.9 billion of GOs, sales tax and motor fuel bonds to the speculative grade level of Ba1. Standard & Poor's and Fitch Ratings then both downgraded Chicago, though both maintain investment grade ratings, citing liquidity risks triggered by the Moody's downgrade.
Secondary Market
The yield on the 10-year benchmark muni general obligation on Tuesday was up by as much as two basis points from 2.28% on Monday, while the yield on the 30-year GO rose by as much as two basis points from 3.25%, according to a read of Municipal Market Data's triple-A scale.
Treasury prices were lower on Tuesday as the yield on the two-year Treasury note rose to 0.60% from 0.57% on Monday, while the 10-year yield increased to 2.28% from 2.22% and the 30-year yield rose to 3.06% from 3.01%.
The 10-year muni to Treasury ratio was calculated on Monday at 102.5% versus 105.2% on Friday, while the 30-year muni to Treasury ratio stood at 109.5% compared to 110.4%, according to MMD.
Bond Buyer Visible Supply
The Bond Buyer's 30-day visible supply calendar increased $1.53 billion to $15.935 billion on Tuesday. The total is comprised of $6.548 billion competitive sales and $9.387 billion of negotiated deals.
MSRB Previous Session's Activity
The Municipal Securities Rulemaking Board reported 38,084 trades on Monday on volume of $6.777 billion.
The most active bond, based on the number of trades, was the New Jersey Economic Development Authority's 2013 Series NN revenue refunding school facilities construction bond 5s of 2026, which traded 243 times at an average price of 105.816 with an average yield of 4.118%. The bonds were initially priced at 119.888.
Yvette Shields and Andrew Coen contributed to this report
