Prices of top-shelf municipal bonds continued to strengthen, traders said, with some yields falling as much as six basis points as worries caused by Greek and Chinese financial woes continued to feed a flight to quality movement.
Prices of Puerto Rico General obligation debt were firmer as well, even as the news surrounding the commonwealth continued to remain negative.
Secondary Trading
The yield on the 10-year benchmark muni general obligation fell two to four basis points from 2.26% on Monday, while the yield on the 30-year GO was off four to six basis points from 3.27% from 3.33%, according to a read of Municipal Market Data's triple-A scale. Other maturities were steady to five basis points lower.
Treasury prices were higher as well, with the yield on the two-year Treasury note falling to 0.56% from 0.59% on Monday, while the 10-year yield dropped to 2.19% from 2.28% and the 30-year yield decreased to 2.99% from 3.07%.
The 10-year muni to Treasury ratio was calculated on Monday at 99.0% versus 97.0% on Thursday, while the 30-year muni to Treasury ratio stood at 106.2% compared to 104.4%, according to MMD.
Puerto Rico GO Prices Continue to Strengthen
Last week, prices on Puerto Rico bonds were very volatile, moving up at the end of the week after plunging earlier on Gov. Alejandro García Padilla's statement the commonwealth couldn't pay its $72 billion in debt.
On Monday, Puerto Rico lost its bid to revive a restructuring law that investors argued conflicts with U.S. bankruptcy code, a blow to the commonwealth as it falls deeper into a fiscal crisis. Lawyers for Puerto Rico officials had asked the U.S. Court of Appeals in Boston to reinstate the local law to help it deal with its debt. The court resisted, agreeing instead with a San Juan judge who threw out the statute in February.
In early trading on Tuesday, the Puerto Rico commonwealth Series 2014A general obligation 8s of 2035 were trading as low as 70 cents on the dollar, a high yield of 11.984%, according to the Municipal Securities Rulemaking Board's EMMA website. There were six trades totaling $15 million. On Monday, the GO 8s of 2035 were trading as low as 69, a high yield of 12.164%, in 29 trades totaling $67 million.
Last Thursday, the GOs were trading as low as 68.045, a high yield of 12.339%, in 16 trades totaling $19 million. Last Wednesday, the GOs were trading as low as 68.25, a high yield of 12.301%, in 30 trades totaling $42 million. Last Tuesday, the GOs traded as low as 64, a high yield of 13.13%, in 110 trades totaling $223 million. Last Monday, the GOs traded as low as 68.30, a high yield of 12.291%, in 93 trades totaling $141 million.
This contrasts to Friday, June 26, before the news, when the GOs traded as low as 76.75, a high yield of 10.874%; there were 19 trades totaling $22 million.
Separately on Tuesday, the Puerto Rico commonwealth Series 2012A GO public improvement 5s of 2041 were trading as low as 60.372 cents on the dollar, a high yield of 8.954% in two trades totaling $190,000. On Tuesday, the GO 5s were trading as low as 52.50, a high yield of 10.268% in 57 trades totaling $5 million
Last Thursday, the GOs were trading as low as 58.386 cents on the dollar, a high yield of 9.258%, in 57 trades totaling $7.9 million. Last Wednesday, the GOs were trading as low as 57.25, a high yield of 9.439%, in 85 trades totaling $43.3 million. Last Tuesday, the bonds were trading as low as 51.625, a high yield of 10.434%, in 125 trades totaling $44.3 million. Last Monday, the bonds traded at a low price of 51.716, a high yield of 10.416%, in 48 trades totaling $26.6 million.
On Friday, June 26, the bonds traded as low as 63.033, a high yield of 8.571% in 33 trades totaling $15.4 million, according to EMMA.
Primary Market
In the competitive sector on Tuesday, Tampa, Fla., is set to sell two separate issues totaling around $127 million.
The sales consist of $88.95 million of Series 2015 water and sewer systems refunding revenue bonds, rated Aa1 by Moody's and triple-A by S&P and Fitch, and $38.13 million of Series 2015 non-ad valorem refunding revenue bonds, rated Aa2 by Moody's Investors Service, AA-plus by Standard & Poor's and AA-minus by Fitch Ratings.
Also from the Sunshine State week, the Central Florida Expressway Authority is set to competitively sell $194 million of Series 2015 senior lien revenue bond anticipation notes on Wednesday. The BANs are rated A2 by Moody's and A by S&P and Fitch.
And Hillsborough County, Fla., is set to competitively sell $140 million of Series 2015 community investment tax refunding revenue bonds on Wednesday. The bonds are rated A1 by Moody's.
In the negotiated sector on Wednesday, the Illinois State Toll Highway Authority's $400 million of Series 2015A toll highway senior revenue bonds are expected to be priced by Bank of America Merrill Lynch.
The bonds are rated Aa3 by Moody's Investors Service and AA-minus by S&P and Fitch.
This deal is the first of two new-money borrowings to finance a record year of capital spending. The $1.6 billion of capital spending planned this year is part of the 15-year, $12 billion Move Illinois capital program launched in 2011. The authority operates 286 miles of toll highways in 12 counties in northern Illinois.
Since 1996, the authority has issued almost $8 billion of bonds, with the most issuance occurring in 2008 and 2014 when it sold $1.1 billion and $1.5 billion, respectively. The authority sold no debt in 1997, 1999 through 2004 or in 2011 or 20012.
MSRB Previous Session's Activity
The Municipal Securities Rulemaking Board reported 38,920 trades on Monday on volume of $6.242 billion.
The most active bond, based on the number of trades, was the New York City Transitional Finance Authority's Series 2015 S-2 building and revenue bond 4s of 2044, which traded 150 times at an average price of 100.288 with an average yield of 3.948%. The bonds were initially priced at 99.625 to yield 4.022%.
Bond Buyer Visible Supply
The Bond Buyer's 30-day visible supply calendar increased $948.2 million to $10.04 billion on Tuesday. The total is comprised of $3.14 billion competitive sales and $6.91 billion of negotiated deals.
