Prices of top-shelf municipal bonds continued to show weakness on Wednesday, traders said, with yields on some maturities up from four to six basis points.
Treasury prices were also trading lower ahead of the Federal Open Market Committee's afternoon statement on interest rates and after the morning's weak report on gross domestic product.
U.S. real GDP posted a gain of just 0.2% in the first quarter after seeing three quarters of healthy growth. Most analysts are now expecting the Fed will keep rates at their current target.
"Weaker-than-expected first-quarter GDP should push rate normalization from the Fed toward September at earliest," Municipal Market Data Senior Market Analyst Randy Smolik wrote in a market comment. "Even though the Street fully believes that GDP will rebound in the second quarter, the Fed will not get confirmation of this until well into the summer -- putting the September meeting as the first likely chance the Fed will decide to start normalizing rates."
Secondary Market
The yield on the 10-year benchmark muni general obligation on Wednesday rose three to five basis points from 2.03% on Tuesday, while the yield on the 30-year GO was up four to six basis points from 2.95%, according to a read of MMD's triple-A scale.
On Wednesday, April 22, the yield on the 10-year muni stood at 2.00% while the yield on the 30-year was at 2.91%.
Treasury prices were lower as well with the yield on the two-year Treasury note rising to 0.57% from 0.56% on Tuesday, while the 10-year yield increased to 2.05% from 1.98% and the 30-year yield rose to 2.76% from 2.67%.
The 10-year muni to Treasury ratio was calculated Tuesday at 102.5% versus 104.0% on Monday, while the 30-year muni to Treasury ratio stood at 110.2% compared to 111.1%, according to MMD.
Primary Market
Several new deals are coming to market on Wednesday.
Siebert, Brandford, Shank priced for retail investors the $267 million New York State Dormitory Authority's Series 2015A dormitory facilities revenue bonds for the State University of New York. The institutional pricing will be held on Thursday.
The bonds were priced to yield from 0.73% with 3% and 5% coupons in a split 2017 maturity to 3.79% with a 3.75% coupon in 2036. No retail orders were taken in the 2028-2032 and 2034 maturities. The 2016 maturity was offered as a sealed bid.
The SUNY issue is rated Aa3 by Moody's Investors Service and AA-plus by Standard & Poor's and Fitch Ratings.
DASNY is also expected to come to market on Wednesday with a $689 million revenue bond deal priced by JPMorgan for the Orange Regional Medical Center Obligation Group. The bonds are rated Ba1 by Moody's and BB-plus by S&P.
On April 9, DASNY came to market with more than $1 billion of higher education bonds with issues for New York University, Columbia University and The New School. DASNY is one of the most prolific issuers in the United States and has ranked among the top 10 muni issuers in each of the past 10 years.
On Thursday, the state of Massachusetts is coming to market with two separate competitive sales of general obligation bonds totaling $550 million.
The offerings consist of $450 million of Series B consolidated loan of 2015 GOs and $100 million of consolidated loan of 2015 GOs. Proceeds will benefit various capital purposes.
The bonds are rated Aa1 by Moody's Investors Service and AA-plus by Standard & Poor's and Fitch Ratings.
The sale was originally structured to include a taxable component, but this was changed during the sale process.
"We determined that we wouldn't need taxable proceeds," said Matthew T. Sheaff, communications director for state Treasurer Deborah Goldberg. "Because all of the bonds will be tax-exempt, that changed where and how much we wanted to place at particular spots on the curve."
The Bay State last sold bonds by competitive bid on Dec. 17, 2014, when it auctioned various issues.
Since 1995, Massachusetts has issued $47.22 billion of general obligation debt, with high years of issuance occurring in 2002 and 2005 when they issued $4.634 billion and $3.355 billion, respectively.
The Bay State saw low years of issuance in 1999 and 2008, when they issued only $995.2 million — the only year since 1995 when the commonwealth didn't issue at least $1 billion — and $1.197 billion, respectively.
MSRB Previous Session's Activity
The Municipal Securities Rulemaking Board reported 41,678 trades on Tuesday on volume of $9.931 billion.
The most active bond, based on the number of trades, was the Allen County, Ohio's Series 2015A hospital facilities revenue refunding and improvement 4s of 2044, which traded 275 times at an average price of 99.232 with an average yield of 4.044%. The bonds were initially priced at 96.634 to yield 4.20%.
Bond Buyer Visible Supply
The Bond Buyer's 30-day visible supply calendar decreased $334.4 million to $8.429 billion on Wednesday. The total is comprised of $4.297 billion competitive sales and $4.132 billion of negotiated deals.
