Prices of top-rated municipal bonds were steady at mid-session, traders said, as Wayne County, Mich., prepares to sell $186.9 million of delinquent tax anticipation notes.
Secondary Market
The yield on the 10-year benchmark muni general obligation was unchanged from 2.32% on Wednesday, while the yield on the 30-year GO was flat at 3.30%, according to a read of Municipal Market Data's triple-A scale.
Treasury prices were lower on Thursday with the yield on the two-year Treasury note rising to 0.70% from 0.68% on Wednesday, while the 10-year yield rose to 2.42% from 2.37% and the 30-year yield increased to 3.18% from 3.15%.
The 10-year muni to Treasury ratio was calculated on Wednesday at 101.1% versus 96.4% on Tuesday, while the 30-year muni to Treasury ratio stood at 104.2% compared to 103.2%, according to MMD.
Primary Market
Wayne County's DTANs are set to be priced by Bank of America Merrill Lynch, Mich., in a deal that was postponed from last week after County Executive Warren Evans has asked for state fiscal intervention to help the county fix its financial problems.
Standard & Poor's has assigned an SP1 rating to the deal, citing a "strong capacity to pay principal and interest." The borrowing is one the county makes regularly to cover late property tax collections owed to its local units. The county has about $144 million of DTANs outstanding.
In a related action on Wednesday, S&P put Wayne County's general obligation limited tax rating of BB-plus on CreditWatch with negative implications following the county's request for state intervention.
"The CreditWatch placement reflects our expectation that with the onset of actions under Michigan Act 436, the county could lose some of the autonomy currently held by the CEO and his staff," said Standard & Poor's analyst Jane Ridley.
S&P said that under the law if the request is approved by the state for a financial review, the Wayne County board could choose one of four possible outcomes: a consent agreement; appointment of an emergency manager; a neutral evaluation; or it could pursue a Chapter 9 bankruptcy filing.
Thursday's sale has Public Financial Management as municipal advisor, Axe & Ecklund as note counsel and Orrick, Herrington & Sutcliffe as special bankruptcy counsel.
Since 1999, the county has issued around $236 million of notes and about $855 million of bonds, according to Thomson Reuters. Before this week, most of the note issuance occurred in 2009 when it sold $104 million and most of the bond issuance took place in 2014 when it offered $207 million.
In other action, BAML priced and repriced FirstEnergy Nuclear Generation Corp.'s $295.75 million of pollution control revenue refunding bonds as a remarketing. The bonds are rated Baa3 by Moody's Investors Service and BBB-minus by S&P.
The $82.8 million of the state of Ohio's Series 2005B non-AMT pollution control revenue refunding bonds were priced at par to yield 4% in 2034. The $99.1 million of the Ohio Water Development Authority's Series 2010A non-AMT pollution control revenue refunding bonds were priced at par to yield 3.75% in 2033. The $7.2 million of the Ohio Air Quality Development Authority's Series 2005B non-AMT pollution control revenue refunding bonds were priced at par to yield 3.125% in 2034. The $8 million of the Ohio Air Quality Development Authority's Series 2010A non-AMT pollution control revenue refunding bonds were priced at par to yield 3.125% in 2033. The $26 million of the Ohio Air Quality Development Authority's Series 2010B non-AMT pollution control revenue refunding bonds were priced at par to yield 3.75% in 2033. The $72.65 million of the Beaver County, Pa., Industrial Development Authority's Series 2005A non-AMT pollution control revenue refunding bonds were priced at par to yield 4% in 2035.
BAML also received the written award on the Maryland Health and Higher Educational Facilities Authority's $257.3 million of revenue bonds for the Meritus Medical Center. The bonds were priced to yield from 0.84% with a 5% coupon in 2016 to 4.39% with a 4.25% coupon in 2035; a 2040 term bond was priced as 5s to yield 4.31% and a 2045 term was priced as 5s to yield 4.38%. The issue is rated BBB by S&P and Fitch Ratings.
Morgan Stanley priced the California Health facilities Financing Authority's $100 million of Series 2015A revenue bonds for Stanford Health Care. The issue was priced as 4 1/4s to yield 4.33% in 2052 and as 5s to yield 4.03% in 2054. The bonds are rated Aa2 by Moody's, AA-minus by S&P and AA by Fitch.
SPDJI: Puerto Rico Muni Bond Indexes Hit New Highs
As of Wednesday, Puerto Rico municipal bond yields have hit new highs, according to J.R. Rieger, Global Head of Fixed Income at S&P Dow Jones Indices.
General obligation bonds tracked in the S&P Municipal Bond Puerto Rico General Obligation Bond Index have returned negative 3.3% so far in June, according to SPDJI, with the average yield hitting a new high of 9.02%. The yield at the end of 2014 was 7.94%.
The average yield of bonds in the broader S&P Municipal Bond Puerto Rico Index has also been dragged to a record high this week ending at 8.37%. The yield at the end of 2014 was 7.57%.
Rieger said that some contributing factors to the rise include the prospects of the Puerto Rico Electrical Power Authority (PREPA) defaulting on its debt service in July, a possible restructuring of Government Development Bank debt and the possible postponement of GO set-asides.
In secondary trading, Puerto Rico commonwealth GOs continued to move lower on Thursday. The Puerto Rico Series A of 2014 GOs traded at 78.75 and at 78.69 when two interdealer trades were made for $1.36 million of the paper, according to the Municipal Securities Rulemaking Board's EMMA website.
On Wednesday, the GOs traded between 75.307 and 79 when seven customers traded $11.39 million of the securities, according to EMMA. The two biggest sell trades on Wednesday were for $3.43 million and $2 million, when two customers sold the GOs for 78.125 and 79, respectively. The biggest buy trade was for $5 million, when a customer bough the bonds for 78.375.
On Tuesday, the GOs traded between 80.75 and 79.125 on volume of $26.98 million. The two biggest sell trades on Tuesday were for $5 million each, when customers sold the GOs for 79.50 and 79.125. The three biggest buy trades on Tuesday were for $2 million apiece when customers bought the GOs for 80.50, 80.50 and 79.375, according to EMMA.
Tax-Exempt Money Market Funds Post Outflows
Tax-exempt money market funds experienced outflows of $1.24 billion, bringing total net assets to $243.88 billion in the period ended June 22, according to The Money Fund Report, a service of iMoneyNet.com. This followed an outflow of $970.8 million to $245.11 billion in the previous week.
The average, seven-day simple yield for the 390 weekly reporting tax-exempt funds remained at 0.01% for a 112th straight week.
The total net assets of the 986 weekly reporting taxable money funds fell $14.99 billion to $2.370 trillion in the period ended June 23, after experiencing an outflow of $14.99 billion to $2.370 trillion in the prior week.
The average, seven-day simple yield for the taxable money funds remained at 0.02% for the 23rd consecutive week.
Overall, the combined total net assets of the 1,376 weekly reporting money funds increased $18.61 billion to $2.634 trillion in the period ended June 23, which followed an outflow of $15.96 billion to $2.370 trillion the week before.
MSRB Previous Session's Activity
The Municipal Securities Rulemaking Board reported 43,642 trades on Wednesday on volume of $12.229 billion.
The most active bond, based on the number of trades, was the University of Vermont and State Agricultural College's Series 2015 GO 4s of 2040, which traded 256 times at an average price of 99.473 with an average yield of 4.024%. The bonds were initially priced at 97.816 to yield 4.14%.
Bond Buyer Visible Supply
The Bond Buyer's 30-day visible supply calendar decreased $2.65 billion to $7.32 billion on Thursday. The total is comprised of $2.11 billion competitive sales and $5.21 billion of negotiated deals.
