Prices of top-rated municipal bonds were substantially stronger at mid-session, traders said, with yields on some maturities weakening by as much as five basis points.
Meanwhile, the timing of the Puerto Rico Aqueduct and Sewer Authority's $750 million bond deal was in doubt, according to a market source, and the bonds had not been priced as of midday.
"The delay has brought up some speculation that hedge fund buyers want further clarification of bondholder rights," according to Municipal Market Data Senior Analyst Randy Smolik.
Early on Thursday, PRASA released a second supplement to its official statement on the deal, which added a section on the "limited rights of the bondholders; disposition of operating revenues upon acceleration; and maximum interest rate provision."
Bank of America Merrill Lynch had no comment on the timing on the deal or details of the offering.
BAML had been expected to price PRASA's Series 2015A senior lien revenue bonds on Thursday. It will be the first deal by a Puerto Rico public sector agency since the commonwealth sold $3.5 billion general obligations in March 2014.
The deal is rated Caa3 by Moody's Investors Service, CCC-minus by Standard & Poor's and CC by Fitch Ratings.
On Tuesday, S&P placed PRASA's rating on negative CreditWatch. "The CreditWatch action reflects our expectation that events could unfold within the next three months that could expose PRASA to greater restructuring efforts," according to S&P.
Meanwhile, Fitch said it expected that some high-yield municipal closed-end funds would consider participating in the deal.
"We believe that PRASA's recent price stability relative to other Puerto Rican issuers may lure some managers," Fitch said on Tuesday.
Moody's said earlier, when assigning its rating, "proceeds of the current issue will finance elements of PRASA's capital improvement program for the five years ending with fiscal 2019, and will also repay $67 million owed to the GDB and refinance $90 million of short-term bank-held senior debt. As much as $288 million of the proceeds will reimburse the authority for past operating revenue spent on capital improvements."
Primary Market
Goldman, Sachs priced the New York Metropolitan Transportation Authority's $406.21 million of Series 2015D transportation revenue refunding bonds for institutions after it held a one-day retail order period.
The $354.29 million of Subseries 2015D-1 fixed-rate bonds were priced as 5s to yield 2.50% in 2024 and from 2.84% in 2026 to 3.40% in 2034; a 2035 triple split maturity was priced as 3 3/8s to yield 3.50%, as 3s to yield about 3.262%, and as 5s to yield 3.43%.
The $51.92 million of Subseries 2015D-2 mandatory tender bonds were priced as 4s to yield 1.44% in 2035 with a mandatory tender date of 2019.
The issue was rated A1 by Moody's, AA-minus by S&P, A by Fitch and AA-plus by Kroll Bond Rating Agency.
Citigroup priced the Massachusetts Development Finance Agency's $179.26 million of Series 2015 H-1 revenue bonds for CareGroup.
The bonds were priced to yield from 1.34% with a 3% coupon in 2018 to 3.68% with a 5% coupon in 2033. The 2016 and 2017 maturities were offered as sealed bids.
The deal was rated A3 by Moody's and A-minus by S&P.
Secondary Trading
The yield on the 10-year benchmark muni general obligation on Thursday was three to five basis points weaker from 2.21% on Tuesday, while the yield on the 30-year GO was off three to five basis points from 3.08%, according to a read of Municipal Market Data's triple-A scale.
Treasury prices were mostly higher on Thursday, with the yield on the two-year Treasury note remaining flat from 0.67% on Wednesday, while the 10-year yield fell to 2.10% from 2.13% and the 30-year yield decreased to 2.77% from 2.83%.
The 10-year muni to Treasury ratio was calculated on Wednesday at 104.0% versus 100.6% on Tuesday, while the 30-year muni to Treasury ratio stood at 109.4% compared to 107.6%, according to MMD.
Tax-Exempt Money Market Funds Post Outflows
Tax-exempt money market funds experienced outflows of $833.1 million, bringing total net assets to $247.11 billion in the period ended Aug. 17, according to The Money Fund Report, a service of iMoneyNet.com. This followed an inflow of $2.15 billion to $247.94 billion in the previous week.
The average, seven-day simple yield for the 383 weekly reporting tax-exempt funds remained at 0.01% for the 120th straight week.
The total net assets of the 967 weekly reporting taxable money funds rose $245.7 million to $2.447 trillion in the period ended Aug. 18, after experiencing an inflow of $361.1 million 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 31st week in a row.
Overall, the combined total net assets of the 1,350 weekly reporting money funds decreased $587.4 million to $2.694 trillion in the period ended Aug. 18, which followed an inflow of $2.51 billion to $2.694 trillion the week before.
MSRB Previous Session's Activity
The Municipal Securities Rulemaking Board reported 40,735 trades on Wednesday on volume of $8.961 billion.
The most active bond, based on the number of trades, was the Washington HealthCare Facilities Authority Series 2015A Providence Health and Services revenue 4s of 2045, which traded 170 times at an average price of 99.561, an average yield of 4.024%. The bonds were initially priced at 97.766 to yield 4.13%.
Bond Buyer Visible Supply
The Bond Buyer's 30-day visible supply calendar decreased $2.24 billion to $6.60 billion on Thursday. The total is comprised of $2.41 billion competitive sales and $4.19 billion of negotiated deals.
