Prices of top-quality municipal bonds were weaker at mid-session, traders said, with yields on some maturities strengthening by as much as one basis point.
The municipal bond market is taking on the last of the week's big new issues, led by the large deal from Charlotte, N.C.
Secondary Trading
The yield on the 10-year benchmark muni general obligation on Thursday was up by as much as one basis point from 2.17% on Wednesday, while the yield on the 30-year GO was up by as much as one basis point from 3.06%, according to a read of Municipal Market Data's triple-A scale.
Treasury prices were mostly lower on Thursday, with the yield on the two-year Treasury note rising to 0.69% from 0.65% on Wednesday, while the 10-year yield rose to 2.16% from 2.13% and the 30-year yield increased to 2.83% from 2.82%.
The 10-year muni to Treasury ratio was calculated on Wednesday at 101.8% versus 99.4% on Tuesday, while the 30-year muni to Treasury ratio stood at 108.5% compared to 108.4%, according to MMD.
Primary Market
Wells Fargo Securities priced Charlotte's $462.8 million of Series 2015 water and sewer system refunding revenue bonds.
The bonds were priced to yield from 0.67% with a 5% coupon in 2017 to 3.33% with a 4% coupon in 2036; a 2040 term bond was priced as 5s to yield 3.12% and a 2045 term was priced as 4s to yield 3.61%. A split maturity in 2016 was offered as sealed bids.
The issue is rated triple-A by Moody's Investors Service, Standard & Poor's and Fitch Ratings.
Charlotte said it believes the offering is the biggest single deal the city has ever issued.
While investors are still searching for credits with a little more spread, there typically is a lot of demand for paper from North Carolina, according to Matt Buscone, a senior vice president and portfolio manager at Boston-based Breckinridge Capital Advisors.
Since 1995, Charlotte has issued roughly $8.59 billion of debt. The highest years of issuance occurred in 2008 and 2009, as the city issued $602 million and $1.13 billion, respectively. The city saw low years of issuance in 1995 and 1997, when it issued just $162 million and $75 million, respectively.
Goldman, Sachs priced the District of Columbia's $379.63 million of Series 2015 hospital refunding revenue bonds for the Children's Hospital Obligated Group.
The issue was priced as 5s to yield from 0.99% in 2017 to 3.69% in 2035; a split 2040 term bond was priced as 4s to yield 4.15% and as 5s to yield 3.85%; a 2044 term was priced as 5s to yield 3.90%. A 2016 maturity was offered as a sealed bid. The bonds were rated A1 by Moody's and A-plus by Fitch.
In the competitive arena, Citigroup won the Florida Board of Education's $307.75 million of Series 2015E public education capital outlay refunding bonds with a true interest cost of 2.15%. The issue was priced to yield from 0.62% with a 5% coupon in 2017 to 3.48% with a 4% coupon in 2036. The issue was rated Aa1 by Moody's and triple-A by S&P and Fitch.
Tax-Exempt Money Market Funds Post Inflows
Tax-exempt money market funds experienced inflows of $2.15 billion, bringing total net assets to $247.94 billion in the period ended Aug. 10, according to The Money Fund Report, a service of iMoneyNet.com. This followed an inflow of $370.2 million to $245.79 billion in the previous week.
The average, seven-day simple yield for the 384 weekly reporting tax-exempt funds remained at 0.01% for the 119th straight week.
The total net assets of the 966 weekly reporting taxable money funds rose $361.1 million to $2.446 trillion in the period ended Aug. 11, after experiencing an inflow of $23.54 billion to $2.446 trillion in the prior week.
The average, seven-day simple yield for the taxable money funds remained at 0.02% for the 30th week.
Overall, the combined total net assets of the 1,350 weekly reporting money funds increased $2.51 billion to $2.694 trillion in the period ended Aug. 11, which followed an inflow of $23.91 billion to $2.692 trillion the week before.
S&P Puts BHAC Bond Insurance Rating on Negative Creditwatch
S&P placed the financial strength of Berkshire Hathaway insurance subsidiaries, including the AA-plus rating on municipal bond insurer BHAC on negative CreditWatch, due to the uncertainty surrounding the parent company's proposed acquisition of Precision Castparts.
BHAC is also rated Aa1 by Moody's Investors Service.
"BHAC, which insured municipal bonds for about a year in the immediate aftermath of the financial crisis, covers a small piece (estimated to be below $20 billion) of the municipal insurance market," according to Alan Schankel, Municipal Strategist at Janney.
MSRB Previous Session's Activity
The Municipal Securities Rulemaking Board reported 39,879 trades on Wednesday on volume of $8.595 billion.
Bond Buyer Visible Supply
The Bond Buyer's 30-day visible supply calendar fell $955 million to $7.43 billion on Thursday. The total is comprised of $3.27 billion competitive sales and $4.17 billion of negotiated deals.
Shelly Sigo contributed to this report.
