Prices of top-quality municipal bonds were stronger at mid-session, according to traders, with yields weakening by as much as one basis point.
In the primary, traders were preparing for the start of the week’s issuance, which is divided up into pre-FOMC and post-FOMC action.
Secondary Market
“Muni secondary trading had its typical slow Monday morning activity,” Randy Smolik, Municipal Market Data’s senior market analyst, wrote in a market comment. “But the better start for Treasuries encouraged some firmer offerings in the secondary.”
The yield on the 10-year benchmark muni general obligation was as much as one basis point weaker from 2.04% on Friday, while the yield on the 30-year GO was as much as one basis point softer from 3.07%, according to a read of MMD's triple-A scale.
Treasury prices were also higher on Monday, with the yield on the two-year Treasury slipping to 0.63% from 0.64% on Friday, while the 10-year yield declined to 2.06% from 2.08% and the 30-year yield decreased to 2.87% from 2.89%.
The 10-year muni to Treasury ratio was calculated on Friday at 98.2% versus 99.3% on Thursday, while the 30-year muni to Treasury ratio stood at 106.1% compared to 106.6%, according to MMD.
Primary Market
In the primary, municipal bond traders will see about $5.1 billion of new issue supply hit the market, according to Ipreo and The Bond Buyer. This week’s volume will consist of $4.0 billion of negotiated deals and $1.1 billion of competitive sales.
Morgan Stanley is expected to price the state of Tennessee’s $416 million of Series 2015A general obligation bonds and Series 2015B refunding bonds for retail investors on Monday with the institutional pricing set for Tuesday.
The issue is rated triple-A by Moody’s Investors Service and Fitch Ratings and AA-plus by S&P.
Tennessee’s annual GO offering will finance capital needs and the timing for the sale was strategic, a top state official said, with the sale set ahead of the Federal Open Market Committee’s monetary policy meeting on Tuesday and Wednesday.
Jefferies is set to price the state of Texas’ $223 million of Series 2015D GOs and water financial assistance bonds on Tuesday. The issue is rated triple-A by Moody’s, S&P and Fitch.
Morgan Stanley is also 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 after the FOMC statement on Wednesday.
On Thursday, Raymond James is slated to price the Broward County Airport Authority, Fla.’s $489 million of airport revenue bonds for the Fort Lauderdale International Airport.
The issue will consist of Series A and C bonds subject to the alternative minimum tax and Series B non-AMT bonds. The deal is tentatively structured as serials maturing from 2016 to 2035 with term bonds in 2040 and 2045.
The bonds are rated A1 by Moody’s Investors Service and A-plus by Standard & Poor’s.
Bank of America Merrill Lynch is expected to price the Washington Township HealthCare District, Calif.’s $146 million of Series 2015B 2012 Election GOs on Thursday.
Siebert Brandford Shank is set to price Harris County, Texas’ $145 million of Series 2015B toll road senior lien revenue refunding bonds on Thursday.
BAML is expected to price the California Pollution Control financing Authority’s $126 million of solid waste disposal refunding revenue bonds for Waste Management Inc. on Thursday. The issue is rated A-minus by S&P.
And Wells Fargo Securities is set to price the Virginia Housing Development Authority’s $101 million of taxable mortgage pass-through bonds on Thursday. The deal is rated triple-A by Moody’s and S&P.
Also on Thursday, Citigroup will remarket Posey County, Ind.’s $1.2 billion of Series 2013A revenue refunding bonds for the Midwest Fertilizer Co. The deal, which was last remarketed by Citi on March 27 and before that on Nov. 14, 2014, has a put date of Aug. 2, 2016. The issue is rated A1-plus by S&P.
In the competitive arena, the California State Public Works Board is selling $223 million of Series 2015H Department of Corrections and Rehabilitation lease revenue bonds for the Corcoran State Prison. The issue is rated A1 by Moody’s, A-plus by S&P and A by Fitch. The bonds are tentatively structured to mature serially from 2016 to 2035.
One deal, however, that traders won’t see this week is the $1.4 billion sale from the Mission Economic Development Corp. in Texas.
The high-yield offering, which will used to back the Natgasoline methanol plant project, was moved onto next week’s calendar, according to a market source.
The deal will be priced by BAML and consists of $1.16 billion of Series 2015A taxable senior lien revenue bonds and $240 million of Series 2015B tax-exempt junior lien revenue bonds.
The preliminary official statement said the bonds have a significant degree of risk, are not being registered under the Securities Act, and are being offered under Rule 144A. Ratings are being applied for from S&P and Fitch.
Previous Week's Actively Traded Issues
Revenue bonds comprised 56.55% of new issuance in the week ended Oct. 23, down from 57.89% in the previous week, according to Markit. General obligation bonds comprised 35.44% of total issuance, up from 34.00%, while taxable bonds made up 8.01%, down from 8.11%.
Some of the most actively traded issues in the week were in New York, Puerto Rico and Florida, according to Markit.
In the revenue bond sector, the Utility Debt Securitization Authority, N.Y., LIPA 5s of 2036 were traded 81 times. In the GO bond sector, the Puerto Rico commonwealth GO 8s of 2035 were traded 44 times. And in the taxable bond sector, the Florida Hurricane Catastrophe Fund Finance Corp. 2.995s of 2020 were traded 14 times, Markit said.
MSRB Previous Session's Activity
The Municipal Securities Rulemaking Board reported 31,586 trades on Friday on volume of $8.77 billion.
Bond Buyer Visible Supply
The Bond Buyer's 30-day visible supply calendar fell $770 million to $8.42 billion on Monday. The total is comprised of $2.66 billion competitive sales and $5.76 billion of negotiated deals.
