Supply starved municipal bond buyers got some relief on Tuesday as a wave of supply swept into the market, led by New York and California issuers.
Sources said the deals got done at good prices and were warmly received by buyers.
“The municipal bond market is steady on better volumes as market participants focus on the slate of new issues coming to market [on Tuesday],” ICE Data Services said in a late Tuesday comment. “Taxable yields are as much 2 1/2 basis points lower as that sector keeps pace with Treasuries. Puerto Rico issues are quiet.”
Primary market
In the competitive arena on Tuesday, the Dormitory Authority of the State of New York sold $1.699 billion of tax-exempt and taxable state sales tax revenue bonds in six separate offerings. Proceeds will be used for various state programs.
Citigroup won the $443.115 million of Series 2018E tax-exempt Bidding Group 2 bonds with a true interest cost of 3.5228%.
JPMorgan Securities won the $396.96 million of Series 2018E tax-exempt Bidding Group 1 bonds with a TIC of 2.4456%.
Bank of America Merrill Lynch won the $390.205 million of Series 2018E tax-exempt Bidding Group 3 bonds with a TIC of 4.0608%.
Morgan Stanley won the $367.27 million of Series 2018E tax-exempt Bidding Group 4 bonds with a TIC of 4.1946%.
Morgan Stanley also won the $79.815 million of Series 2018G taxable bonds with a TIC of 3.6899%.
Barclays Capital won the $21.455 million of Series 2018G taxable bonds with a TIC of 3.1124%.
The bonds are rated Aa1 by Moody’s Investors Service and AAA by S&P Global Ratings.
Additionally, the California Public Works Board competitively sold $104.235 million of Series 2018C lease revenue bonds on Tuesday.
Proceeds will be used to finance and refinance a portion of the costs of the design and construction associated with various correctional facilities projects.
Wells Fargo Securities won the bonds with a TIC of 2.8817%.
The deal is rated A1 by Moody’s and A-plus by S&P and Fitch Ratings.
Since 2008, the board has sold about $13.5 billion of debt with the most issuance occurring in 2009 when it offered $2.2 billion. It sold the last amount of bonds in 2008 when it issued $365.5 million.
In the negotiated sector, Raymond James & Associates priced the Texas Public Finance Authority’s $164.915 million of general obligation refunding bonds.
JPMorgan Securities priced the Indiana Finance Authority’s $137.335 million of taxable and tax-exempt hospital revenue bonds for Parkview Health.
Bank of America Merrill Lynch priced the Maine Municipal Bond Bank’s $135.11 million of Series 2018B bonds on Tuesday.
BAML also priced the Kentucky Bond Development Corp.’s $202.475 million of convention facilities revenue bonds for the Lexington Center Corp.
Citigroup circulated a premarketing scale on the New Jersey. Transportation Trust Fund Authority’s $1.58 billion of Series 2018A transportation system bonds ahead of the pricing on Wednesday.
Proceeds will refund outstanding bonds. The deal is rated Baa1 by Moody’s, BBB-plus by S&P and A-minus by Fitch except for the 2037 maturity which is insured by Build America Mutual and rated AA by S&P.
Tuesday’s bond sales
California
New York
Texas
Kentucky
Maine
Indiana
New Jersey
Bond Buyer 30-day visible supply at $9.20B
The Bond Buyer's 30-day visible supply calendar decreased $2.33 billion to $9.20 billion for Wednesday. The total is comprised of $2.99 billion of competitive sales and $6.21 billion of negotiated deals.
Secondary market
Municipal bonds were mixed on Tuesday, according to a late read of the MBIS benchmark scale, with yields falling as much as one basis point in the one- to nine-year and 16- and 17-year maturities, rising as much as a basis point in the 10- to 13-year and 19- to 25-year maturities and remaining unchanged in the 14- and 15-year,18-year and 26- and 27-year maturities .
High-grade munis were stronger, according to yields calculated on MBIS' AAA scale, which saw yields fall as much as one basis point in the one- to 30-year maturities.
Municipals were steady on Municipal Market Data’s AAA benchmark scale, which showed the yield on both the 10-year muni general obligation and the yield on 30-year muni maturity remaining unchanged.
Treasury bonds were stronger as stock prices traded mixed.
On Tuesday, the 10-year muni-to-Treasury ratio was calculated at 84.6% while the 30-year muni-to-Treasury ratio stood at 100.0%, according to MMD. The muni-to-Treasury ratio compares the yield of tax-exempt municipal bonds with the yield of taxable U.S. Treasury with comparable maturities. If the muni/Treasury ratio is above 100%, munis are yielding more than Treasury; if it is below 100%, munis are yielding less.
Previous session's activity
The Municipal Securities Rulemaking Board reported 39,620 trades on Monday on volume of $12.22 billion.
California, New York and Texas were the municipalities with the most trades, with the he Golden State taking 17.381% of the market, the Empire State taking 11.245%, and the Lone Star State taking 9.438%.
Treasury auctions $40B 4-week bills
The Treasury Department on Tuesday auctioned $40 billion of four-week bills at a 2.105% high yield, a price of 99.836278.
The coupon equivalent was 2.138%. The bid-to-cover ratio was 3.12.
Tenders at the high rate were allotted 74.75%. The median rate was 2.090%. The low rate was 2.070%.
The bills are dated Oct. 4 and due Nov. 1.
Data appearing in this article from Municipal Bond Information Services, including the MBIS municipal bond index, is available on The Bond Buyer Data Workstation.
