Municipal bond prices closed Wednesday stronger, according to traders, as yields fell as much as two basis points in some maturities.
After a busy Tuesday, the market continued right where it left off, as the majority of the larger issues for the week priced.
Primary Market
The action in the market was in fifth gear, with transportation related deals from issuers in Kansas, Maryland, and Delaware among the noteworthy deals.
"We have had an active market today, with the classic municipal supply and demand situation where you have a lot of cash chasing deals as we approach the end of the year," a Midwest trader said. "Borrowers will continue to get strong results from now until the end of the year, there is low supply and lots of cash."
Morgan Stanley priced the Kansas Department of Transportation's $400 million of Series 2015B highway revenue bonds. The bonds were priced to yield from 2.02% with a 5% coupon in 2025 to 2.75% with a 5% coupon in 2035. The deal is rated Aa2 by Moody's Investors Service, triple-A by Standard & Poor's and AA-plus by Fitch Ratings.
Since 2007, the Kansas DOT has issued about $2.2 billion of debt. The largest issuance took place in 2012 and 2014 when the department sold $496 million and $463 million, respectively. The DOT did not come to market in 2011 or 2013.
Bank of America Merrill Lynch won the bidding war for the Maryland Department of Transportation competitive sale of $300 million of Series 2015, Third Issue, consolidated transportation bonds, with a true interest cost of 2.46%. The bonds were priced to yield from 0.92% with a 5% coupon in 2018 to 3.00% with a 3% coupon in 2030.The issue is rated Aa1 by Moody's, triple-A by S&P and AA-plus by Fitch.
RBC Capital Markets priced the Ohio Water Development Authority's $210 million of water pollution control loan fund revenue bonds, series 2015A. The bonds were priced to yield from 1.21% and 1.29% with 5% coupons in a split 2020 maturity to 2.21% with a 5% coupon in 2026.
The District of Columbia sold $250 million of fiscal year 2016 GO tax revenue anticipation notes on Wednesday. PNC Capital Markets won $25 million with an effective rate of 0.2734%, another $25 million with an effective rate of 0.2859%, $50 million with an effective rate of 0.2984% and another $50 million with an effective rate of 0.3110% - bringing its total to $150 million.
Bank of America Merrill Lynch won $50 million with an effective rate of 0.3435%. RBC Capital Markets won $25 million with an effective rate of 0.3461% and Citi won $25 million with an effective rate of 0.3523%. The TRANs are rated MIG-1 by Moody's, SP-1-plus by S&P and F-1-plus by Fitch.
Since 2005, the District of Columbia has issued about $5.19 billion of note debt. The most issuance took place in 2010 and 2011 when D.C. sold $700 million and $820 million of notes, respectively. The nation's capital saw low years in 2005 when it issued $250 million and in 2006 and 2007 when it issued $300 million. During the past 10 years, it has come to market with notes an average of 1.5 times per year.
Bank of America Merrill Lynch priced the Delaware Transportation Authority's $213.140 million of U.S. 301 project revenue bonds, series 2015. The bonds were priced to yield from 1.63% with a 5% coupon in 2021 to 2.00% with a 5% coupon in 2023. The bonds were also priced to yield from 3.41% with a 3.25% coupon in 2032 to 3.79% and 3.30% with a 3.75% and 5% coupon in a split 2040 maturity. A split 2045 maturity was priced to yield 3.76% and 3.37% with a 4% coupon and 5% coupon. A 2055 term bond was priced to yield 3.67% with a 5% coupon. The deal is rated A1 by Moody's and AA-minus by S&P.
Citi priced two deals from the Michigan Finance Authority Local Government Loan Program totaling $324.325 million.
The $197.66 million of department sewage disposal system revenue refunding second lien local project bonds, series 2015C for the Detroit Water and Sewerage Department were priced to yield 1.17% with a 3% coupon in 2017. The bonds were also priced to yield from 3.13% with a 5% coupon in 2026 to 3.34% with a 5% coupon in 2028 and yield from 3.63% with a 5% coupon in 2032 to 3.51% and 3.71% with 5% coupons in a split 2035 maturity. The first half of the 2035 split maturity is insured by Assured Guaranty.
The $126.665 million of local government loan program revenue bonds, series 2015D were priced to yield 0.95% with a 3% coupon in 2017 and to yield from 1.50% with a 5% coupon in 2019 to 2.27% with a 5% coupon in 2022. The bonds were also priced to yield from 3.01% with a 5% coupon in 2027 to 3.51% with a 5% coupon in 2035. The 2028 maturity is insured by Assured Guaranty. The deal is rated Baa3 by Moody's, A-minus by S&P and BBB by Fitch.
The $37.235 million of series 2015D-2, second lien local project bonds was priced as a 2034 bullet maturity to yield 3.66% with a 5% coupon, which is rated Aa1 by Moody's, BBB+ by S&P and BBB-minus by Fitch.
BAML priced two deals for the city of New Orleans totaling $200 million. The $100 million of water revenue bonds were priced to yield from 1.39% with a 3% coupon in 2018 to 3.53% with a 5% coupon in 2035. A 2040 term bond was priced to yield 3.60% with a 5% coupon and a 2045 term bond was priced to yield 3.67% with a 5% coupon. The deal is rated A-minus by S&P and BBB+ by Fitch.
The $100 million of sewerage service revenue bonds were priced to yield from 1.83% with a 5% coupon in 2021 to 3.48% with a 5% coupon in 2035. A 2040 term bond was priced to yield 3.55% with a 5% coupon and a 2045 term bond was priced to yield 3.62% with a 5% coupon in 2045. The deal is rated A by S&P and BBB+ by Fitch.
The state of Texas sold $150 million of college student loan bonds, series 2015 GO AMT bonds, Wells Fargo Securities won with a TIC of 3.05%. The bonds were priced to yield from 1.51% with a 5% coupon in 2020 to 3.28% with a 4% coupon in 2034. The deal is rated triple-A by both Moody's and S&P.
JP Morgan won Louisville/Jefferson Co. Metro Government's $127.715 million of water company system revenue bonds with a TIC of 2.74%. The bonds were priced to yield from 0.40% with a 2% coupon in 2016 to 3.262% with a 3.125% coupon in 2035. The deal is rated triple-A by both Moody's and S&P.
BAML priced the Oklahoma Water Resources Board's $100.62 million of revolving fund revenue bonds for the clean water program, series 2015 master trust. The bonds were priced to yield from 0.52% with a 5% coupon in 2017 to 3.32% with a 3.25% coupon in 2035. A 2040 term bond was priced to yield 3.37% with a 4% coupon. The deal is rated triple-A by Moody's, S&P and Fitch.
Secondary Market
Top-rated municipal bond prices were slightly higher at Wednesday's close. The yield on the 10-year benchmark muni general obligation was one basis point lower to 1.97% from 1.98% on Tuesday, while the 30-year yield was two basis points lower to 2.90% from 2.92%, according to a final read of Municipal Market Data's triple-A scale.
Treasury prices were mostly lower at the close on Wednesday. The two-year Treasury yield rose to 0.93% from 0.90% on Tuesday while the 10-year Treasury yield was higher at 2.18% from 2.15% and the 30-year dropped to 2.91% from 2.92%.
The 10-year muni to Treasury ratio was calculated on Wednesday at 90.4% from 91.9% on Tuesday, while the 30-year muni to Treasury ratio stood at 99.8% compared to 100.1%, according to MMD.
