Prices of top-rated municipal bonds were stronger at mid-session, according to traders, as yields on some maturities weakened by as much as three basis points.
Secondary Market
The yield on the 10-year benchmark muni general obligation on Tuesday fell one to three basis points from 2.23% on Monday, while the yield on the 30-year GO was off one to three basis points from 3.11%, 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 note falling to 0.67% from 0.73% on Monday, while the 10-year yield fell to 2.15% from 2.23% and the 30-year yield decreased to 2.81% from 2.90%.
The 10-year muni to Treasury ratio was calculated on Monday at 99.7% versus 101.8% on Friday, while the 30-year muni to Treasury ratio stood at 107.2% compared to 109.0%, according to MMD.
Primary Market
The first deal of the week's $5 billion of new supply was priced on Tuesday.
Cabrera Capital Markets priced the Harris County Metropolitan Transit Authority, Texas' $115.52 million deal. The $52.62 million of Series 2015A sales and use tax bonds were priced as 5s to yield 1.06% in 2018, 1.29% in 2019 and 1.59% in 2020. The $62.9 million of Series 2015B sales and use tax contractual obligation bonds were priced as 5s to yield from 0.80% in 2017 to 2.77% in 2027; the 2016 maturity was offered as a sealed bid.
The deal is rated Aa2 by Moody's Investors Service and AA-Plus by Standard and Poor's.
Wells Fargo Securities is currently premarketing the Municipal Electric Authority of Georgia's $253.3 million of Series 2015A Plant Vogtle Units 3&4 $183.87 million of Project J and $69.44 million of P revenue bonds.
The MEAG's Project J bonds are rated A2 by Moody's and A-plus by S&P and Fitch Ratings; the Project P bonds are rated Baa2 by Moody's and A-minus by S&P and Fitch.
The biggest deal of the week is a $1 billion offering from the Kansas Development Finance Authority expected on Wednesday. The pension bonds, to be by priced by Bank of America Merrill Lynch, consist of Series 2015H taxable revenue bonds. The issue is rated Aa3 by Moody's and AA-minus by S&P.
Since 1995, the KDFA has issued roughly $9.52 billion of debt, with the highest years of issuance occurring in 2004 and 2010 when the authority issued $929 million and $878 million, respectively. The KDFA saw low years of issuance in 1995 and 1999, when they issued just $58 million and $126 million, respectively.
Also on Wednesday, Goldman, Sachs is scheduled to price the Los Angeles County Public Works Authority, Calif.'s $218.155 million of lease revenue refunding bonds. The issue, which consists of Series B tax-exempts and Series C taxables, is rated A1 by Moody's, AA by S&P and A-plus by Fitch.
And Morgan Stanley is expected to price on Wednesday the state of Michigan's $129.31 million of Series 2015A tax-exempt general obligation environmental program refunding bonds. The issue is rated Aa1 by Moody's and AA-minus by S&P and Fitch.
On Thursday, Wells Fargo Securities is scheduled to price Charlotte, N.C.'s $475 million of water and sewer revenue bonds. The issue is rated triple-A by Moody's, S&P and Fitch.
Goldman is set to price the $381.71 million of hospital refunding revenue bonds, Series 2015 for the Children's Hospital Obligated Group in Washington, D.C., on Thursday.
CUSIP Data Indicate Muni Issuance Slowdown
The volume of requests for new municipal CUSIP identifiers fell for the third month in a row, according to a report released on Tuesday by CUSIP Global Services.
The report, which tracks issuance of new security identifiers as an early indicator of debt market activity, suggests a possible slowdown in new municipal bond issuance in the next few weeks.
CUSIP requests dropped 19% last month, with a total of 1,233 new identifier requests made in July, according to the report. This follows a 1% decrease in June and a 3% decline in May.
On a year-over-year basis, however, requests are up by 36%, reflecting the heavy activity in the municipal market during the first half of 2015.
Texas, New York and California issuers accounted for the highest volume of new requests in July, accounting for 35% of all municipal bond activity during the month.
"The most interesting trend we're seeing in the CUSIP issuance data is the downward trajectory of new municipal bond volume for the third consecutive month," Gerard Faulkner, director of operations for CUSIP Global Services, said in a press release. "While, on a year-over-year basis, we're still seeing growth overall, we are definitely seeing a clear signal that the tide is starting to turn for municipal bond issuance."
MSRB Previous Session's Activity
Trading was extremely light on Monday. The Municipal Securities Rulemaking Board reported 33,041 trades on Monday on volume of $3.895 billion.
"MSRB volume was the lowest of the year, excepting the Friday after New Year's Day," according to Alan Schankel, Municipal Strategist at Janney.
The most active bond, based on the number of trades, was the Washington HealthCare Facilities Authority Series 2015A revenue bonds for Providence Health and Services 4s of 2045, which traded 163 times at an average price of 99.806, an average yield of 4.01%. The bonds were initially priced at 97.766 to yield 4.13%.
Bond Buyer Visible Supply
The Bond Buyer's 30-day visible supply calendar was up $234 million to $8.78 billion on Tuesday. The total is comprised of $2.69 billion competitive sales and $6.09 billion of negotiated deals.
