Prices of top-rated municipal bonds closed higher on Thursday, traders said, with yields on some maturities falling by as much as three basis points. In the previous three trading sessions this week, muni yields rose by as much as 14 basis points.
In the primary, Citi priced the District of Columbia's $534.19 million sale while Bank of America, Merrill Lynch priced the Lower Colorado River Authority, Texas' $245.66 million deal and RBC Capital Markets received the written award on Chicago's $111.72 million offering of sales tax bonds.
Primary Market
Citi priced the D.C. general obligation bond deal in two series. The $500 million of Series 2015A new money GOs were priced as 5s to yield from 1.17% in 2018 to 3.47% in 2038; a 2040 term bond was priced as 4s to yield 3.93%. The $34.19 million Series 2015B GO refunding bonds were priced as 5s to yield 2.58% in 2025, 2.75% in 2026 and 2.87% in 2027.
"Generally, we are very pleased with the deal, we had over $2 billion in orders, which makes it over 4 times oversubscribed," said Jeffrey Barnette, Treasurer for the District of Columbia. "We were concerned today would be difficult to get the deal done, leading up to the sale as things were volatile this week heading into yesterday but the muni market stabilized and it worked out in our favor."
The issue is rated Aa1 by Moody's Investors Service and AA by Standard & Poor's and Fitch Ratings and carries a stable outlook from all three rating agencies.
"We are fortunate we priced the deal today and not earlier this week but with solid execution and strong pricing, we were able to get roughly $7 million in PV savings on the refunding component," said Barnette.
Since 1996, Washington, D.C., has issued about $9 billion of GOs, with the largest issuance occurring in 2007 and 2008 when it offered $1.3 billion and $1 billion, respectively; D.C. sold no bonds in 2006 or 2009.
BAML priced the Lower Colorado River Authority, Texas' $245.66 million of Series 2015 transmission contract refunding revenue bonds for the LCRA Transmission Services Corp.
The bonds were priced to yield from 0.40% with a 4% coupon in 2016 to 4.05% with a 4% coupon in 2035. A split 2040 maturity term bond was priced as 4s to yield 4.11% and as 5s to yield 3.91% and a split 2045 maturity term bond was priced as 4s to yield 4.28% and as 5s to yield 3.98%.
The issue is rated A by S&P and A-plus by Fitch except for the 2033, 2034 and 2035 maturities and the 2040 4s, which are insured by AGM, and rated A2 by Moody's and AA by S&P.
Traders reported oversubscriptions on the LCRA deal, especially on longer maturities.
RBC received the official award on Chicago's $111.72 million of Series 2002 sales tax revenue refunding bonds. The final pricing on the bonds had them yielding from 1.525% with a 2% coupon in 2016 to 4.62% with a 5% coupon in 2034.
Ahead of the sale, Chicago had highlighted the strong coverage and bondholder protections on this sales tax credit.
Still, the ratings on the credit diverged, with the issue being rated triple-A by S&P, BBB-plus by Fitch and AA-plus by Kroll Bond Rating Agency. Moody's wasn't asked to rate the deal.
Secondary Market
The yield on the 10-year benchmark muni general obligation declined one basis point to 2.30% from 2.31% on Wednesday, while the yield on the 30-year GO dropped three basis points to 3.27% from 3.30%, according to the final read of Municipal Market Data's triple-A scale. Secondary trading was light, according to Interactive Data.
Among actively traded issues on Thursday, prices on the Illinois 2003 general obligation funding 5.10s of 2033 were trading stronger, with the yield falling to 5.73% compared to 5.77% on Wednesday, according to Markit.
Treasury prices were mixed on Thursday as the yield on the two-year Treasury note dropped to 0.66% from 0.67% on Wednesday, while the 10-year yield declined to 2.31% from 2.36% and the 30-year yield decreased to 3.03% from 3.11%.
The 10-year muni to Treasury ratio was calculated on Thursday at 101.9% versus 97.7% on Wednesday, while the 30-year muni to Treasury ratio stood at 108.0% compared to 106.3%, according to MMD.
Tax-Exempt Money Market Funds Post Outflows
Tax-exempt money market funds experienced outflows of $1.09 billion, bringing total net assets to $244.09 billion in the period ended June 1, according to The Money Fund Report, a service of iMoneyNet.com. This followed an outflow of $179.4 million to $245.18 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 109th straight week.
The total net assets of the 993 weekly reporting taxable money funds rose $6.28 billion to $2.401 trillion in the period ended June 2, after experiencing an inflow of $1.87 billion to $2.395 trillion in the prior week.
The average, seven-day simple yield for the taxable money funds remained at 0.02% for the 20th consecutive week.
Overall, the combined total net assets of the 1,388 weekly reporting money funds increased $5.19 billion to $2.645 trillion in the period ended May 26, which followed an inflow of $1.69 billion to $2.640 trillion the week before.
MSRB Previous Session's Activity
The Municipal Securities Rulemaking Board reported 49,983 trades on Wednesday on volume of $14.256 billion. The most active bond, based on the number of trades, was the Eastern Illinois University's taxable Build America Bonds with a direct subsidy to issuer's certificates of participation Series 2009A 6.35s of 2036, which traded 497 times at an average price of 87.573 with an average yield of 7.541%. The bonds were initially priced at par to yield 6.35%.
Bond Buyer Visible Supply
The Bond Buyer's 30-day visible supply calendar decreased $2.36 billion to $11.49 billion on Thursday. The total is comprised of $5.17 billion competitive sales and $6.23 billion of negotiated deals.
