Prices of top-rated municipal bonds finished lower on Thursday, traders said, with yields on some maturities rising by as much as two basis points.
In the primary market, DBRS Ltd. made one of its first forays into the U.S. municipal market from across the border in Canada when it rated a North Carolina private activity bond deal that priced this week.
Citi and Goldman, Sachs received the written award on Thursday for the North Carolina Department of Transportation's $100 million of Series 2015 tax-exempt private activity revenue bonds for the I-77 HOT Lanes project.
The PABs, which are subject to the alternative minimum tax, were priced as 5s to yield from 3.72% in 2026 to 4.11% in 2030; a 2037 term bond was priced as 5s to yield 4.31% and a 2054 term was priced as 5s to yield 4.65%.
The issue was rated BBB-minus by Fitch Ratings and was rated BBB by Toronto-based DBRS.
DBRS assigned the BBB rating with stable trends to the PABs, and also to a $189 million loan to be issued under the Transportation Infrastructure Finance and Innovation Act, that will partly fund the design and construction of the I-77 managed toll lane project.
Earlier this month, NCDOT picked I-77 Mobility Partners as the private consortium headed by Cintra Infraestructuras S.A. to build the $655 million 26-mile express lane project. NCDOT is providing a $91.4 million subsidy toward construction, with the remaining funds coming from the PABs, TIFIA loan, and $250 million in equity from the main sponsors Cintra and Aberdeen Global Infrastructure II LLP.
I-77 Mobility Partners will design, construct, finance and operate the project under a 50-year concession agreement. Construction is expected to start this summer and is slated for completion in 2018
DBRS said strengths of the issues include: a capable construction contractor; affluent and growing service area; developer ratio adjustment mechanism; TIFIA loan provides debt servicing flexibility; and fee-setting autonomy. DBRS said challenges include: exposure to volume risk; economic cyclicality; complex contractual structure; traffic forecasting error; and back-ended principal repayment.
Elsewhere in the primary, Loop Capital Markets priced the Pennsylvania Turnpike Commission's $495.27 million of Series 2015A turnpike revenue bonds. The $379.63 million fix-rated Series A-1 bonds were priced as 5s to yield from 1.89% in 2020 to 3.68% in 2033; a 2035 term bond was priced as 4s to yield 4.10%, a 2040 term was priced as 5s to yield 3.94% and a 2045 term was priced as 5s to yield 4.01%. The $115.64 million of Series A-2 SIFMA floating-rate notes were priced to yield from 15 basis points over SIFMA in 2016 to 70 basis points over SIFMA in 2019 and 90 basis points over SIFMA in 2021. The issue was rated A1 by Moody's Investors Service and A-plus by Standard & Poor's and Fitch Ratings.
Also, Jefferies and RBC Capital Markets priced the Dormitory Authority for the State of New York's $124.64 million of school districts revenue and financing program revenue bonds, Series 2015 D, E and F. The bonds in all three series are insured by Build America Mutual Assurance Co. and are rated AA by S&P.
The $84.05 million of Series D bonds were priced to yield from 0.67% with a 3% coupon in 2016 to 3.90% with a 3.75% coupon in 2034. The $13.33 million of Series E bonds were priced to yield from 0.67% with a 3% coupon in 2016 to 3.67% with a 3.50% coupon in 2030. The $27.26 million of Series F bonds were priced to yield from 0.87% with a 4% coupon in 2016 to 3.58% with a 3.375% coupon in 2028.
In the competitive arena, Milwaukee sold a $166.11 million single-issue of GOs consisting of $137.54 million Series 2015 N2 GO promissory notes and $28.57 million of Series 2015 B3 GO corporate purpose bonds. Bank of America Merrill Lynch won the issue with a true interest cost of 2.54%. The deal was priced to yield from 0.21% with a 2% coupon in 2016 to yield 3.73% with a 4% coupon in 2032. The issue was rated Aa3 by Moody's and AA by both S&P and Fitch.
Milwaukee also sold $125 million Series 2015 R1 revenue anticipation notes. TD Securities won the issue with an effective rate of 0.14% and a premium of $610,750. The notes are due Dec. 23 and carry a coupon of 1.00% The RANs were rated MIG-1 by Moody's, SP1-plus by S&P and F1-plus by Fitch.
Also, the Santa Clara Unified School District, Calif., sold two separate competitive offerings totaling $243.45 million. Bank of America won the $140.7 million of Series 2015 election of 2014 GO refunding bonds with a TIC of 3.60%. Pricing information was not available. Morgan Stanley won the $102.75 million of Series 2015 general obligation refunding bonds with a TIC of 3.27%. Pricing information was not available. Both sales are rated AA by S&P.
Secondary Market
The yield on the 10-year benchmark muni general obligation on Thursday rose one basis point to 2.25% from 2.24% on Wednesday, while the yield on the 30-year GO was up two basis points to 3.25% from 3.23%, according to the final read of Municipal Market Data's triple-A scale.
Treasury prices were higher on Thursday as the yield on the two-year Treasury note dropped to 0.54% from 0.58% on Wednesday, while the 10-year yield declined to 2.24% from 2.28% and the 30-year yield decreased to 3.05% from 3.07%.
The 10-year muni to Treasury ratio was calculated on Thursday at 100.8% versus 98.2% on Wednesday, while the 30-year muni to Treasury ratio stood at 106.5% compared to 105.2%, according to MMD.
Tax-Exempt Money Market Funds Post Outflow
Tax-exempt money market funds experienced outflows of $1.32 billion, bringing total net assets to $244.52 billion in the period ended May 11, according to The Money Fund Report, a service of iMoneyNet.com. This followed an inflow of $1.16 billion to $245.84 billion in the previous week.
The average, seven-day simple yield for the 395 weekly reporting tax-exempt funds remained at 0.01% for a 106th straight week.
The total net assets of the 990 weekly reporting taxable money funds fell $6.99 billion to $2.376 trillion in the period ended May 12, after experiencing an inflow of $7.82 billion to $2.383 trillion in the prior week.
The average, seven-day simple yield for the taxable money funds remained at 0.02% for the 16th consecutive week.
Overall, the combined total net assets of the 1,385 weekly reporting money funds decreased $8.32 billion to $2.621 trillion in the period ended May 12, which followed an inflow of $8.98 billion to $2.629 trillion in the prior period.
