Municipal bond yields continue to head higher as big note deals sell

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The municipal bond market returned from a three-day holiday weekend only to see action pick up where it left off last week — with yields heading higher.

This week’s supply is estimated at $4.4 billion, consisting of $3.6 billion of negotiated deals and $815.3 million of competitive sales.

Primary market
In the short-term competitive sector, the Louisville and Jefferson County Metropolitan Sewer District, Ky., sold $226.34 million of Series 2018 sewer and drainage system subordinated bond anticipation notes on Tuesday.

JPMorgan Securities won the BANs with a true interest cost of 2.0818%.

The financial advisor was J.J.B. Hilliard, W.L. Lyons; bond counsel was Wyatt Tarrant.

Suffolk County sold $100 million of Series 2018I tax anticipation notes.

JPMorgan won $71.175 million of the TANs with a TIC of 3.2826%; other information was not immediately available.

The financial advisor was Capital Markets Advisors; the bond counsel was Harris Beach.

In the competitive arena on Wednesday, the Fremont Unified School District, Calif., is selling $127 million of Series C Election of 2014 GOs.

Proceeds are being issued to acquire, repair and build equipment, sites and facilities.

The financial advisor is Keygent; bond counsel is Stradling Yocca. The deal is rated AA-minus by S&P.

Topping the week’s negotiated sector, JPMorgan Securities is set to price the Maricopa County Special Health Care District, Ariz.’s $400 million of Series 2018C general obligation bonds on Thursday.

Proceeds of the sale will be used for capital improvements or renovations to the district’s hospitals and ambulatory and outpatient facilities.

Stifel is the financial advisor while Ballard Spahr is the bond counsel.

The deal is rated Aa3 by Moody’s Investors Service and AAA by Fitch Ratings.

Siebert Cisneros Shank & Co. is expected to price the North Texas Tollway Authority’s $347 million of Series 2018 second tier revenue refunding bonds on Thursday.

Co-managers are Citigroup, FTN Financial Capital Markets, Jefferies and JPMorgan. The financial advisors are Hilltop Securities, Estrada Hinojosa and the RSI Group. Bond counsel are McCall Parkhurst & Horton and Mahomes Bolden.

The deal is rated A2 by Moody’s and A by S&P Global Ratings.

Prior week's top underwriters
The top municipal bond underwriters of last week included Citigroup, Bank of America Merrill Lynch, JPMorgan Securities, Morgan Stanley and Raymond James & Associates, according to Thomson Reuters data.

In the week of Sept. 30 to Oct. 6, Citi underwrote $2.47 billion, BAML $1.56 billion, JPMorgan $1.39 billion, Morgan Stanley $914.5 million and Raymond James $545.4 million.
Bond Buyer 30-day visible supply at $9.32B
The Bond Buyer's 30-day visible supply calendar increased $1.68 billion to $9.32 billion for Tuesday. The total is comprised of $3.78 billion of competitive sales and $5.54 billion of negotiated deals.

Secondary market
Municipal bonds were mostly weaker on Tuesday, according to a midday read of the MBIS benchmark scale. Benchmark muni yields rose as much as one basis point in the eight- to 30-year maturities, fell less than a basis point in the one- to six-year maturities and were unchanged in the seven-year maturity.

High-grade munis were also mostly weaker, with yields calculated on MBIS' AAA scale rising as much as one basis point in the nine- to 30-year maturities, falling less than a basis point in the one-to seven-year maturities and remaining unchanged in the eight-year maturity.

Municipals were weaker on Municipal Market Data’s AAA benchmark scale, which showed the yield on the 10-year muni general obligation rising one to three basis points while the yield on 30-year muni maturity gained two to four basis points.

Treasury bonds were little changed as stock prices traded higher.

On Friday, the 10-year muni-to-Treasury ratio was calculated at 83.2% while the 30-year muni-to-Treasury ratio stood at 98.8%, 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 34,573 trades on Friday on volume of $9.97 billion.

California, New York and Texas were the municipalities with the most trades, with the Golden State taking 15.369% of the market, the Empire State taking 11.717%, and the Lone Star State taking 10.06%.

Prior week's actively traded issues
Revenue bonds comprised 57.13% of total new issuance in the week ended Oct. 5, up from 56.66% in the prior week, according to Markit. General obligation bonds made up 38.00%, down from 38.66% while taxable bonds accounted for 4.87%, up from 4.68%.
Some of the most actively traded munis by type in the week were from New York, New Jersey and Puerto Rico issuers.

In the GO bond sector, the New York City zeros of 2038 traded 31 times. In the revenue bond sector, the New Jersey Transportation Trust Fund Authority 4s of 2037 traded 128 times. And in the taxable bond sector, the Puerto Rico Government Development Bank 5.5s of 2020 traded 15 times.

Week's actively quoted issues
Puerto Rico, Virginia and California names were among the most actively quoted bonds in the week ended Oct. 5, according to Markit.

On the bid side, the Puerto Rico Public Buildings Authority revenue 5.25s of 2042 were quoted by 42 unique dealers. On the ask side, the Front Royal and Warren County Industrial Development Authority, Va., revenue 4s of 2050 were quoted by 175 dealers. And among two-sided quotes, the California taxable 7.3s of 2039 were quoted by 17 dealers.

Prior week's top FAs
The top municipal financial advisors of last week included Public Resources Advisory Group, Backstrom McCarley Berry, PFM Financial Advisors, Kaufman Hall & Associates and Ponder & Co., according to Thomson Reuters data.

In the week of Sept. 30 to Oct. 6, PRAG advised on $1.4 billion, Backstrom $1.3 billion, PFM $891.8 million, Kaufman $424.6 million, and Ponder $250.8 million.
Treasury auctions discount rate bills
Tender rates for the Treasury Department's latest 91-day and 182-day discount bills were higher, as the $48 billion of three-months incurred a 2.220% high rate, up from 2.175% the prior week, and the $42 billion of six-months incurred a 2.380% high rate, up from 2.335% the week before.

Coupon equivalents were 2.264% and 2.442%, respectively. The price for the 91s was 99.438833 and that for the 182s was 98.796778.

The median bid on the 91s was 2.190%. The low bid was 2.130%.

Tenders at the high rate were allotted 57.07%. The bid-to-cover ratio was 2.72.

The median bid for the 182s was 2.350%. The low bid was 2.320%.

Tenders at the high rate were allotted 50.26%. The bid-to-cover ratio was 2.79.

Gary Siegel contributed to this report.

Data appearing in this article from Municipal Bond Information Services, including the MBIS municipal bond index, is available on The Bond Buyer Data Workstation. Click here for a brief tour of the Workstation, or contact Ziad Saba at 212-803-6079 for more information.

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Primary bond market Secondary bond market Louisville and Jefferson County Metropolitan Sewer District, KY Suffolk County Maricopa County Special Health Care District, AZ North Texas Tollway Authority State of California State of Texas State of New York City of New York, NY New Jersey Transportation Trust Fund Authority Government Development Bank for Puerto Rico Puerto Rico Public Buildings Authority