Municipal bond prices were stronger at mid-session as traders saw more supply hit the market, led by issuers in New York, California and Pennsylvania.
Secondary market
The yield on the 10-year benchmark muni general obligation fell as much one basis point from 2.18% on Tuesday, while the 30-year GO yield decreased one to three basis points from 3.04%, according to a read of Municipal Market Data's triple-A scale.
U.S. Treasuries were stronger on Wednesday. The yield on the two-year Treasury dipped to 1.34% from 1.35% on Tuesday, while the 10-year Treasury yield dropped to 2.38% from 2.40%, and the yield on the 30-year Treasury bond decreased to 3.01% from 3.04%.
On Tuesday, the 10-year muni to Treasury ratio was calculated at 90.6%, compared with 91.3% on Monday, while the 30-year muni to Treasury ratio stood at 100.1%, versus 100.5%, according to MMD.
MSRB: Previous session's activity
The Municipal Securities Rulemaking Board reported 41,698 trades on Tuesday on volume of $8.14 billion.
Primary market
Ramirez & Co. priced the New York Metropolitan Transportation Authority’s $682.12 million of Series 2017B dedicated tax fund climate bond certified green bonds for institutions on Wednesday after holding a retail order period on Tuesday.
The $309.96 million of Series 2017B-1 bonds were priced to yield from 0.82% with a 4% coupon in 2018 to 3.58% with a 3.50% coupon in 2038. A 2042 maturity was priced as 5s to yield 3.29%, a 2047 maturity was priced as 5s to yield 3.34%, a split 2052 maturity was priced as 5s to yield 3.45% and as 4s to yield 3.85% and a 2057 maturity was priced as 5 1/4s to yield 3.49%.
The $372.16 million of Series 2017B-2 bonds were priced to yield from 1.52% with a 5% coupon in 2022 to 2.57% with a 5% coupon in in 2028; a 2031 maturity was priced as 5s to yield 2.85%; a 2032 maturity was priced as 4s to yield 3.17%; a four-way split 2033 maturity was priced as 5s to yield 2.99%, as 5 1/4s to yield 2.89%, as 4s to yield 3.29% and as 3 1/8s to yield 3.34%; a split 2034 maturity was priced as 5s to yield 3.06% and as 4s to yield 3.36%.
The deal is rated AA by S&P Global Ratings and Fitch Ratings.
Barclays Capital priced and repriced the San Francisco Bay Area Rapid Transit District’s $386.16 million of general obligation
The $273.28 million of Series 2017A-1 election of 2016 green bonds were repriced to yield from 0.85% with a 4% coupon in 2018 to 2.95% with a 5% coupon in 2037; a 2042 term bond was repriced as 4s to yield 3.49% and a term bond in 2047 was priced as 5s to yield 3.08%.
The $28 million of taxable Series 2017A-2 election of 2016 green bonds was a 2017 bullet maturity repriced at par to yield 0.822%.
The $84.88 million of Series 2017E election of 2004 refunding green bonds were repriced to yield from 0.85% with a 4% coupon in 2018 to 1.07% with a 5% coupon in 2020. The bonds were also repriced to yield from 2.91% with a 5% coupon in 2036 to 3.37% with a 4% coupon in 2037.
The deal is rated triple-A by Moody’s Investors Service and S&P.
Since 2007, BART has sold roughly $1.95 billion of securities, with the largest issuance occurring in 2015 when it sold $463 million. The Bay Area Rapid Transit did not come to market in 2008, 2009, 2011 and 2014.
RBC Capital Markets priced the Dormitory of the State of New York's $304 million of school district revenue bonds.
DASNY's $93.28 million of Series 2017A bonds were priced to yield from 1.17% with a 5% coupon in 2019 to 3.64% with a 3.5% coupon in 2035. The 2018 maturity was offered as a sealed bid. The series is rated A-plus by S&P and AA-minus by Fitch, except for the 2026 through 2035 maturities which are insured by Assured Guaranty Municipal Corp. and are rated AA by S&P.
The $131.21 million of Series 2017B bonds were priced to yield from 1.15% with a 3% coupon in 2019 to 3.77% with a 3.625% coupon in 2038. A term bond in 2042 was priced to yield 3.33% with a 5% coupon and a term bond in 2046 was priced to yield 3.87% with a 3.75% coupon. The 2018 maturity was offered as a sealed bid. The series is rated A-plus by S&P and AA-minus by Fitch, except for the 2026 through 2038, the 2042 and the 2046 maturities which are insured by AGM and are rated AA by S&P.
The $39.66 million of Series 2017C bonds were priced to yield from 1.15% with a 3% coupon in 2019 to 2.96% with a 5% coupon in 2032. The 2018 maturity was offered as a sealed bid. The series is rated A-plus by S&P and AA-minus by Fitch, except for the 2026 through 2032 maturities which are insured by AGM and are rated AA by S&P.
The $22.16 million of Series 2017D bonds were priced to yield from 1.13% with a 3% coupon in 2019 to 2.96% with a 5% coupon in 2032. The 2018 maturity was offered as a sealed bid. The series is rated Aa2 by Moody’s and AA-minus by Fitch.
The $17.70 million of Series 2017E bonds were priced to yield from 1.23% with a 3% coupon in 2019 to 2.94% with a 5% coupon in 2029. The 2018 maturity was offered as a sealed bid. The series is a rated A-plus by S&P and AA-minus by Fitch, except for the 2020 through 2029 maturities, which are insured by Build America Mutual and rated AA by S&P.
Jefferies priced the Pennsylvania Housing Finance Agency’s $189.51 million of Series 2017-123 single-family mortgage revenue bonds.
The $89.51 million of Series 2017-123A bonds subject to the alternative minimum tax were priced at par to yield from 1.20% and 1.30% in a split 2018 maturity to 3.15% in 2027; a 2039planned amortization class bond was priced as 4s to yield 2.15% with an average life of four years.
The $100 million of Series 2017-123B non-AMT bonds were priced at par to yield 2.90% and 2.95% in a split 2027 maturity, 3% and 3.05% in a split 2028 maturity, 3.50% in 2032, 3.90% in 2037 and 4% in 2042.
The deal is rated Aa2 by Moody’s and AA-plus by S&P.
Bank of America Merrill Lynch is set to price Hawaii’s $876.185 million of Series 2017 FK, FL, FM, FN, FO and FP refunding and taxable general obligation bonds for institutions on Wednesday.
The $594.92 million of Series FK bonds were priced for retail to yield from 1.19% with a 5% coupon and a 4% coupon in a split 2020 maturity to 3.64% with a 3.50% coupon in 2037. The 2030 through 2032 maturities, as well as the second half of split maturities in 2033, the 2034, the second half of a split 2035 maturity and the second half of a 2037 split maturity were not available to retail investors.
The $4.20 million of Series FL bonds was priced for retail as a bullet maturity in 2017 which will be sold by sealed bid. The $1.20 million of Series FM bonds were priced for retail as a bullet maturity in 2017 which will be sold by sealed bid.
The $230.87 million of Series FN bonds were priced for retail to yield from 1.36% with a 5% coupon in 2021 to 3.01% with a 4% coupon in 2031.
The $37.50 million of Series FO bonds were priced for retail at par to yield 1.95% in 2020 and also priced to yield 2.167% with a 2.30% coupon in 2021. The $7.50 million of Series FP bonds were priced for retail at par to yield from 1.95% in 2020 to 3.94% in 2037.
The deal is rated Aa1 by Moody’s, AA-plus by S&P and AA by Fitch.
Citigroup is expected to price the Houston Independent School District, Texas’ $838 million of Series 2017 limited tax schoolhouse and refunding bonds.
The deal, backed by the Permanent School Fund guarantee program, is rated triple-A by Moody’s, S&P and Fitch.
Citi is also set to price the Louisiana Public Facilities Authority’s $412 million of Series 2017 refunding revenue bonds for the Ochsner Clinic Foundation.
The deal is rated A3 by Moody’s and A-minus by Fitch.
In the competitive arena, the Metropolitan Water District of Southern California sold $245.17 million of Series 2017A subordinate water revenue refunding bonds.
JPMorgan Securities won the bonds with a true interest cost of 2.15%. Pricing information was not immediately available.
The deal is rated AA-plus by S&P and Fitch.
Bond Buyer visible supply
The Bond Buyer's 30-day visible supply calendar decreased $7.1 million to $16.30 billion on Wednesday. The total is comprised of $4.09 billion of competitive sales and $12.21 billion of negotiated deals.
Muni bond CUSIP requests fell 13% in April
Demand for new municipal bond CUSIP identifiers dropped 13% in April after gaining 14% in March, CUSIP Global Services said on Wednesday. The report tracks requests by issuers for bond identifiers as an early indicator of new volume.
A total of 930 new municipal bond identifier requests were made last month, down from 1,066 in March, 933 in February and up from 826 in January.
On a year-over-year basis, municipal bond request volume was down almost 24% through the end of April.
“There are definitely some technical factors at play in this data, notably, reduced demand from mutual funds who had to issue new classes of shares to get into compliance with the Fiduciary Rule in January and February, but are now no longer required to do so,” Gerard Faulkner, director of operations for CUSIP Global Services, said in a press release. “Whether April will turn out to be a technicality or a harbinger of trends to come remains to be seen.”
Including long- and short-term notes and other municipals categories, there were a total of 1,085 municipal CUSIP requests in April, down from March’s 1,280.
For the year to date through April, total municipal security CUSIP orders were 4,458, down almost 20% from the same period in 2016, when 5,553 were sought.
“We’re starting to see a pattern of on-again, off-again volume in new CUSIP requests as issuers juggle a great deal of uncertainty about the macroeconomic environment, the regulatory picture, and market volatility,” said Richard Peterson, senior director, S&P Global Market Intelligence.
BlackRock: Tax day doesn’t sway muni demand
Municipal bonds posted a fifth positive month, bucking the typical tax season trend, according to BlackRock’s May 2017 municipal market update from the team's muni group of Peter Hayes, head of the municipal bonds group, Sean Carney, head of municipal strategy and James Schwartz, head of municipal credit research said that
“Falling interest rates and a favorable supply/demand dynamic helped municipal bonds notch their fifth straight month of positive performance,” said the report. “Monthly issuance of $29 billion was down 18% year-over-year and 15% below the five year average but demand remained largely constructive and retail driven, resisting the seasonal tendency for outflows around tax day. April saw $2.4 billion enter muni bond funds, bringing year-to-date flows to $7.4 billion. Investors remain yield-focused, with flows directed primarily to long-term and high yield funds.”
The firm, which manages $118 billion in municipal assets, also said it views the initial tax reform framework as largely positive for municipals, given no explicit threats to the tax exemption.
“In fact, the elimination of deductions would likely increase retail demand for the asset class, leaving it one of few remaining tax safe-havens. Loss of the state and local tax deduction could have adverse effects on the credit quality of higher-tax states, while positive for the demand for muni bonds of high-tax states. The proposed 15% corporate tax rate poses the largest threat to municipals, as it could limit demand from banks and insurance companies.”
