Municipal bonds were weaker at mid-day, according to traders, with yields on top-quality munis rising one to three basis points on some maturities.
"The certainty of a Fed rate hike in December presses bonds weaker," said Randy Smolik, MMD Senior Market Analyst. "With Fed doves commenting like [Chicago Federal Reserve Bank President Charles] Evans that he would not dissent on a rate hike of the board seemed in favor, the bond markets were still backpedalling in anticipation of the Fed beginning to normalize rates starting in December."
Secondary Market
The yield on the 10-year benchmark muni general obligation was one to three basis points higher from 2.16% on Friday, while the 30-year GO was also anywhere from one to three basis points higher from 3.17% on Friday, according to a mid-session read of Municipal Market Data's triple-A scale.
Treasuries were mostly weaker at mid-day on Monday, as the yield on the two-year Treasury fell to 0.88% from 0.89% on Friday. The 10-year Treasury yield rose to 2.34% from 2.33% and the 30-year yield increased to 3.11% from 3.09%.
The 10-year muni to Treasury ratio was calculated on Friday at 92.7% versus 93.7% on Thursday, while the 30-year muni to Treasury ratio stood at 102.6% compared to 103.3%, according to MMD.
Primary Market
Total muni volume for the holiday shortened week of Nov.9 is estimated by Ipreo at $4 billion, comprised of $2.5 billion of negotiated deals and $1.5 billion of competitive sales. The week will essentially be separated into two halves, coming to market Tuesday and Thursday. On Wednesday, in observance of Veterans Day, no bonds will be traded or sold.
By far the largest deal on the calendar for next week is the Florida Development Finance Corporation's $1.75 billion of revenue bonds for the All Aboard Florida passenger rail project. The deal is expected to be priced by Bank of America Merrill Lynch on Tuesday, though some market sources were skeptical of the timing. "They have been trying to get the deal done for weeks but have been having trouble getting enough people interested in the deal, even those investors who are looking for yield," one banker said.
All Aboard, a planned 235-mile intercity express train between Miami and Orlando, is owned by Florida East Coast Industries whose parent company is Fortress Investment Group. If completed the project would be the first privately owned passenger train developed in the U.S.
The project received a private activity bond allocation from the U.S. Department of Transportation, but continues to fight state and federal legal challenges brought by Martin and Indian River counties where the train will pass through but not stop. Both counties have said they will suffer numerous ill effects from the project.
The deal is not rated and is being sold to qualified institutional buyers and accredited investors.
JPMorgan is expected to price the Central Texas Regional Mobility's $375 million of senior lien revenue and refunding put bonds on Tuesday. The deal is expected to mature serially from 2025-2045 and is rated Baa2 by Moody's and BBB-plus by S&P.
BAML is also scheduled to price the school board of Miami-Dade Counties' $229 million of certificates of participation on Tuesday. The COPs are rated A1 by Moody's and A-minus by S&P.
JP Morgan is also slated to price Kershaw County, S.C., public schools foundation installment purchase's $101.91 million of refunding revenue bonds. The bonds are rated A1 by Moody's and A-minus by S&P.
In the competitive arena on Tuesday, the Washington, Md., suburban sanitation department will be selling $150.67 million of consolidated public improvement refunding bonds. The deal is rated Aaa by Moody's and triple-A by both S&P and Fitch Ratings.
Washtubs is a frequent market participant, and most recently sold $390 million last month, when Bank of America Merrill Lynch won the bonds with a true interest cost of 3.43%.
The New Jersey Environmental Infrastructure Trust will be selling three separate issues totaling $140.69 million on Tuesday. The largest of the three issues will be $117.475 million of refunding bonds, Series 2015B-R2, which will be subject to alternative minimum tax.
The Previous Week's Actively Traded Sectors
Revenue bonds comprised 55.25% of new issuance in the week ended Oct. 30, down from 55.38% in the previous week, according to Markit. General obligation bonds comprised 37.05% of total issuance, up from 36.47%, while taxable bonds made up 7.70%, down from 8.15%.
Some of the most actively traded issues in the week were in California and Texas.
In the revenue bond sector, The Bexar County, Texas 4s of 2051 were traded 90 times. In the GO sector, the California 5s of 2045 were traded 29 times. And in the taxable bond sector, the Los Angeles municipal improvement corporation 3.432s of 2021 were traded 27 times, Markit said.
MSRB Previous Session's Activity
The Municipal Securities Rulemaking Board reported 29,559 trades on Friday on volume of $5.489 billion.
Bond Buyer Visible Supply
The Bond Buyer's 30-day visible supply calendar rose $1.836 billion to $8.99 billion on Monday. The total is comprised of $3.39 billion competitive sales and $5.60 billion of negotiated deals.
