Prices of top-rated municipal bonds were stronger at mid-session, according to traders, with yields weakening by as much as three basis points.
Traders are keeping a wary eye on the Federal Reserve as it gathers for a two-day meeting to decide the course of interest rates. The states of Tennessee, Texas and Florida all came to market on Tuesday ahead of the Fed decision.
Secondary Market
The yield on the 10-year benchmark muni general obligation was as much as two basis points weaker from 2.03% on Monday, while the yield on the 30-year GO was as much as three basis points softer from 3.06%, according to a read of Municipal Market Data's triple-A scale.
Treasury prices were higher on Tuesday, with the yield on the two-year Treasury slipping to 0.62% from 0.63% on Monday, while the 10-year yield fell to 2.03% from 2.06% and the 30-year yield decreased to 2.84% from 2.86%.
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
Morgan Stanley priced the state of Tennessee’s $385.59 million of Series 2015A general obligation bonds and Series 2015B refunding bonds for institutions after a one-day retail order period on Monday.
The $287.77 million of Series 2015A bonds were priced to yield from 0.53% with a 4% coupon in 2017 to 2.88% with a 5% coupon in 2035; a 2016 maturity was offered as a sealed bid.
The $97.83 million of Series 2015B bonds were priced to yield from 0.76% with a 4% coupon in 2018 to 1.60% with a 5% coupon in 2022; and from 1.95% with a 5% coupon in 2024 to 2.56% with a 4% coupon in 2028; a 2016 maturity was offered as a sealed bid.
The issue was rated triple-A by Moody’s Investors Service and Fitch Ratings and AA-plus by Standard & Poor’s.
Jefferies priced the state of Texas’ $234.97 million of Series 2015D GOs and water financial assistance bonds on Tuesday.
The bonds were priced to yield from 1.47% with a 5% coupon in 2021 to 3.10% with a 5% coupon in 2036. Term bonds in 2040 and 2045 were priced as 5s and as 4s to yield 3.21% and 3.68%, respectively.
The issue was rated triple-A by Moody’s, S&P and Fitch.
Since 2005, the Lone Star state has issued about $4 billion of debt, with the most issuance occurring in 2011 and 2013 when it sold $599 million and $641 million respectively. The state sold the least amount of bonds in 2005 and 2014 when it issued $247 million and $150 million, respectively.
In the competitive arena, the state of Florida Board of Education sold $230 million of its full faith and credit Series 2015F public education capital outlay refunding bonds.
Citigroup won the issue with a true interest cost of 2.97%. The bonds were priced to yield from 0.47% with a 5% coupon in 2017 to 3.32% with a 4% coupon in 2036.
The bonds were rated Aa1 by Moody’s and triple-A by S&P and Fitch.
Morgan Stanley is expected to price the Marin County Healthcare District, Calif.’s $170 million issue on Tuesday. The bonds are rated Aa2 by Moody’s.
Most of the rest of the week’s issuance will take place on Thursday, after the FOMC statement is released Wednesday afternoon.
Most economists expect the Fed will not raise interest rates at this week’s meeting, although there remains some question as to whether the Fed will hike in December.
MSRB Previous Session's Activity
The Municipal Securities Rulemaking Board reported 34,165 trades on Monday on volume of $5.18 billion.
Bond Buyer Visible Supply
The Bond Buyer's 30-day visible supply calendar rose $453 million to $8.87 billion on Tuesday. The total is comprised of $3.02 billion competitive sales and $5.86 billion of negotiated deals.
