Prices of top-quality municipal bonds were mixed at mid-session, traders said, with yields on some maturities remaining unchanged and others rising by as much as one basis point.
Market reaction was muted to testimony by Federal Reserve Chair Janet Yellen which indicated an interest rate hike was likely this year.
In the primary, municipal bond traders saw the pricings of some hefty new issues, led by deals from California and North and South Carolina.
Secondary Market
The yield on the 10-year benchmark muni general obligation on Wednesday was as much as one basis point stronger from 2.33% on Tuesday, while the yield on the 30-year GO was flat at 3.31%, according to a read of Municipal Market Data's triple-A scale.
Treasury prices were mixed on Wednesday, with the yield on the two-year Treasury note rising to 0.66% from 0.64% on Tuesday, while the 10-year yield fell to 2.38% from 2.40% and the 30-year yield decreased to 3.18% from 3.19%.
The 10-year muni to Treasury ratio was calculated on Tuesday at 95.6% versus 96.2% on Monday, while the 30-year muni to Treasury ratio stood at 102.9% compared to 103.3%, according to MMD.
On Wednesday, Yellen said the central bank is on track for an interest rate increase in 2015.
"If the economy evolves as we expect, economic conditions likely would make it appropriate at some point this year to raise the federal funds rate target," Yellen said in testimony before the House Financial Services Committee. She said Fed officials expect growth "to strengthen over the remainder of this year and the unemployment rate to decline gradually."
This was not the first time Yellen has hinted a rate hike would come this year. Most recently, on Friday, she told an audience in Cleveland the Fed is on track to raise rates later this year.
"My own outlook for the economy and inflation is broadly consistent with the central tendency of the projections submitted by FOMC participants at the time of our June meeting," she said on Friday. "Based on my outlook, I expect that it will be appropriate at some point later this year to take the first step to raise the federal funds rate and thus begin normalizing monetary policy."
On Wednesday, Yellen again said the timing of the first rate rise in almost a decade is less important than the rate of increases, which she said would be gradual. She said Fed forecasts for higher rates this year are projections and "not statements of intent to raise rates at any particular time."
Primary Market
JPMorgan priced the California State University Trustees' $1.04 billion of revenue bonds for institutions after a one-day retail order period on Tuesday.
The Series 2015A tax-exempts were priced to yield from 0.74% with 2% and 5% coupons in a split 2017 maturity to 3.52% with a 5% coupon in 2038. A 2043 split term bond was priced as 4s to yield 4.09% and as 5s to yield 3.64%; a 2047 term was prices as 5s to yield 3.68%. The 2015 and 2016 maturities were offered as sealed bids.
The issue was rated Aa2 by Moody's Investors Service and AA-minus by Standard & Poor's.
Wells Fargo priced Charleston, S.C.'s $139.875 million of Series 2015 waterworks and sewer system capital improvement revenue bonds. The bonds were priced as 5s to yield from 1.27% in 2020 to 3.28% in 2037. Term bonds in 2040 and 2045 were priced as 5s to yield 3.37% and 3.45%, respectively. The bonds were rated triple-A by Moody's and S&P and AA-plus by Fitch.
Bank of America Merrill Lynch priced the North Carolina Eastern Municipal Power Agency's $419.375 million of Series 2015 taxable revenue bonds. The bonds were priced at par to yield from 1.085% in 2016 to 4.058% in 2025. The deal was rated A-minus by S&P and A by Fitch.
Piper Jaffray priced the Montgomery County Independent School District, Texas' $249.66 million of Series 2015 unlimited tax school building and refunding bonds. The issue was priced to yield from 0.62% with a 3% coupon in 2017 to 3.51% with a 5% coupon in 2040; a 2045 term bond was priced as 4s to yield 4.11%. The deal is backed by the Permanent School Fund guarantee program and rated triple-A by Moody's and S&P.
Bank of America Merrill Lynch is slated to price the Indiana Toll Road ITR Concession Co.'s $1 billion of senior secured notes. Fitch and S&P both rate the bonds BBB, which will be issued by IFM's subsidiary ITR Concession Co.
MSRB Previous Session's Activity
The Municipal Securities Rulemaking Board reported 39,915 trades on Tuesday on volume of $7.798 billion.
The most active bond, based on the number of trades, was the New Jersey State Transportation Trust Fund Authority's Series 2011B transportation system 5s of 2042, which traded 103 times at an average price of 101.999, an average yield of 4.61%. The bonds were initially priced at 99.223.
Bond Buyer Visible Supply
The Bond Buyer's 30-day visible supply calendar decreased $1.73 billion to $12.37 billion on Wednesday. The total is comprised of $2.66 billion competitive sales and $9.71 billion of negotiated deals.
