Prices of top-shelf municipal bonds were stronger at mid-session, according to traders, with yields on some maturities falling by as much as two basis points.
In the primary, traders saw the last big deal of the week come to market with the institutional pricing of the New York Metropolitan Transportation Authority's transportation revenue refunding bonds.
Secondary Market
The yield on the 10-year benchmark muni general obligation on Thursday was off as much as two basis points from 2.24% on Wednesday, while the yield on the 30-year GO was as much as one basis point lower from 3.20%, according to a read of Municipal Market Data's triple-A scale.
Treasury prices were mixed on Thursday, with the yield on the two-year Treasury note flat from 0.70% on Wednesday, while the 10-year yield fell to 2.31% from 2.32% and the 30-year yield decreased to 3.03% from 3.04%.
The 10-year muni to Treasury ratio was calculated on Wednesday at 96.6% versus 96.9% on Tuesday, while the 30-year muni to Treasury ratio stood at 105.4% compared to 105.2%, according to MMD.
Primary Market
Siebert Brandford Shank priced the N.Y. MTA's $419.71 million of Series 2015C transportation revenue refunding bonds for institutions after holding a one-day retail order period.
The $344.01 million of Subseries 2015C-1 fixed-rates were priced to yield from 2.73% with a 5% coupon in 2025 to 3.33% with a 5% coupon and 3.25% with a 5.25% coupon in a split 2031 maturity; a split 2034 maturity was priced as 5s to yield 3.46% and as 3.70s to yield 3.73%; a 2035 maturity was priced as 5s to yield 3.50%.
The $75.70 million of Subseries 2015C-2 fixed-rate mandatory tender bonds were priced as 4s to yield 1.75% in a 2033 bullet maturity with a mandatory tender maturity date of 2020.
Morgan Stanley was co-manager on the deal with Bank of America Merrill Lynch, JPMorgan Securities and Ramirez as co-senior managers. Orrick, Herrington & Sutcliffe and Bryant Rabbino were co-bond counsel. Public Financial Management was the financial advisor and Hawkins Delafield & Wood was special disclosure counsel.
The issue was rated A1 by Moody's Investors Service, AA-minus by Standard & Poor's, A by Fitch Ratings and AA-plus by Kroll Bond Rating Agency. All four rating agencies maintain a stable outlook on the credit.
The deal was the first since Moody's raised the MTA to A1 from A2 on July 10. The MTA has about $35 billion of debt outstanding.
JPMorgan received the written award on the Austin Independent School District, Texas' $150.41 million of unlimited tax refunding bonds.
The $63.11 million of Series 2015A bonds, backed by the Permanent School Fund guarantee program were priced to yield from 0.74% with a 4% coupon in 2017 to 3.62% with a 4% coupon in 2035. This insured series is rated triple-A by Moody's, S&P and Fitch.
The $87.30 million of Series 2015B bonds, not backed by the PSF, were priced as 5s to yield from 1.29% in 2019 to 3.09% in 2031. This non-insured series is rated triple-A by Moody's and AA-plus by S&P and Fitch.
Raymond James received the official award on Lafayette, La.'s $91.60 million of Series 2015 communications system revenue refunding bonds. The issue was priced to yield from 0.61% with a 2% coupon in 2016 to 3.87% with a 3.75% coupon. The bonds were insured by Assured Guaranty Municipal Corp. and rated A2 by Moody's and AA by S&P.
U.S. Bank Wealth Management: Bullish, Not Bearish on Munis
This week's volume of around $9 billion might be the peak of weekly issuance we will see for the remainder of the year, Dan Heckman, senior fixed income strategist at U.S. Bank Wealth Management, told The Bond Buyer.
"There might be another week or two of issuers trying to scramble and get ahead of an impending rate hike, but I think somewhere in the $5 billion to $6 billion range might become the norm; as refundings likely have begun to ebb here and we will see that play out in a stronger fashion," he said during a phone interview.
He also said that as long as we don't have a major and continued fallout of outflows, the market fundamentally is in good shape.
"Tax receipts are coming in very strong and some of the states are trying to figure out how to spend the extra money, they may use cash versus issuing additional debt but we are bullish for the rest of the year rather than bearish."
Heckman thought all along that September could be a good time frame for a rate hike but notes his one concern about the Fed is are they going to wait too long?
"If that ends up happening, then they are left at a position of weakness with fewer levers to pull. It might be in the best interest to make a move sooner rather than later. The move will be gradual in nature, lower and slower," he said. "All in all the Fed would prefer to get off zero but they need to get into a situation where they are comfortable doing that. Inflation is starting to perk up, there is more of a case to raise rates than to not."
Heckman also noted there is a recurring trend in the market of bifurcation between investment-grade and high-yield and he sees that trend continuing. He will also be keeping an eye on the healthcare and high-education sectors going forward.
"Investment-grade issuers will be rewarded and we will have to see how the Affordable HealthCare Act will impact the healthcare sector, as there were some winners and some who are not doing too well. With higher-education, there are funding challenges and while we are not ringing the alarm bell now, you definitely want to be careful what you are buying."
Tax-Exempt Money Market Funds Post Inflows
Tax-exempt money market funds experienced inflows of $346.9 million, bringing total net assets to $246.83 billion in the period ended July 20, according to The Money Fund Report, a service of iMoneyNet.com. This followed an outflow of $743.4 million to $246.48 billion in the previous week.
The average, seven-day simple yield for the 392 weekly reporting tax-exempt funds remained at 0.01% for a 116th straight week.
The total net assets of the 987 weekly reporting taxable money funds rose $29.44 billion to $2.428 trillion in the period ended July 21, after experiencing an outflow of $3.93 billion to $2.399 trillion in the prior week.
The average, seven-day simple yield for the taxable money funds remained at 0.02% for the 27th consecutive week.
Overall, the combined total net assets of the 1,379 weekly reporting money funds increased $29.78 billion to $2.675 trillion in the period ended July 14, which followed an outflow of $4.67 billion to $2.645 trillion the week before.
MSRB Previous Session's Activity
The Municipal Securities Rulemaking Board reported 38,556 trades on Wednesday on volume of $11.072 billion.
The most active bond, based on the number of trades, was the Columbus Development Authority, Ga., Series 2015A&B, first mortgage revenue bonds for the Columbus ALF project, 7.2s of 2045, which traded 130 times at an average price of 99.388, an average yield of 7.25%. The bonds were initially priced at 99.388 to yield 7.25%.
Bond Buyer Visible Supply
The Bond Buyer's 30-day visible supply calendar increased $547.1 million to $11.42 billion on Thursday. The total is comprised of $4.11 billion competitive sales and $7.31 billion of negotiated deals.
