Municipal bonds finish stronger as primary market starts to heat up

Top-rated municipal bonds ended stronger on Wednesday as new offerings from Texas and California issuers hit traders' screens.

Primary market
Bank of America Merrill Lynch priced the North Texas Tollway Authority’s $2.54 billion of system revenue and refunding bonds for retail investors ahead of the institutional pricing on Thursday.

The $1.77 billion of Series 2017A first tier bonds were priced to yield from 1.05% with 4% and 5% coupons in a triple-split 2019 maturity to 3.36% with a 4% coupon and 3.06% with a 5% coupon in a split 2036 maturity; a split half of a 2043 maturity was priced as 5s to yield 3.25%. No retail orders were taken in the split portions of the 2019-2027, 2031, 2043 maturities or the 2030, 2033-2035, 2037-2039 or 2048 maturities.

The $772.3 million of Series 2017B second tier bonds were priced to yield from 1.11% with a 4% coupon in 2019 to 3.27% with a 5% coupon in 2039. No retail orders were taken in the split halves of the 2023-2027 or 2030-2032, 2043, or 2048 maturities.

The Series 2017A bonds are rated A1 by Moody’s Investors Service and A by S&P Global Ratings; the Series 2017B bonds are rated A2 by Moody’s and A-minus by S&P except for the 2034-2038 maturities which are insured by Assured Guaranty Municipal and rated A2 by Moody’s and AA by S&P.

“I am sure that NTTA deal did fine in retail and my feeling is that when it comes on Thursday for institutions, it is going to be a riot,” said one New York trader. “You got a lot of people who are looking for yield and haven’t been able to find it, so there will be people reaching for it.”

Jefferies priced the Airport Commission of the city and county of San Francisco’s $875.18 million of second series revenue bonds for the San Francisco International Airport.

The $337.3 million of Series 2017A bonds subject to the alternative minimum tax were priced as 5s to yield 3.26% and as 5 1/4s to yield 3.16% in a split 2042 maturity and as 5s to yield 3.32% in 2047.

The $232.37 million of Series 2017B non-AMT governmental purpose bonds were priced as 5s to yield 3.07% in a 2047 bullet maturity.

The $45.1 million of Series 2017C taxables were priced to yield 25 and 35 basis points over the comparable Treasury securities in 2019 and 2020.

The $145.12 million of Series 2017D AMT bonds were priced as 5s to yield from 1.20% in 2020 to 2.37% in 2027.

The $115.3 million of Series 2018A AMT bonds were priced as 5s to yield from 1.25% in 2019 to 2.07% in 2024.

The bonds are rated A1 by Moody’s and A-plus by S&P and Fitch Ratings.

Since 2008 the commission has sold $7.45 billion of securities, with the most issuance occurring in 2008 when it sold $1.48 billion. It did not come to market at all in 2015.

BB-101217-MUN

BAML priced the Indiana Finance Authority’s $146.69 million of state revolving fund program green bonds in two series.

The $21.07 million of Series 2017B green bonds were priced as 5s to yield from 1.02% in 2020 to 2.14% in 2028.

The $125.62 million of Series 2017C refunding green bonds were priced as 5s to yield 0.87% in 2018 and from 1.16% in 2021 to 2.40% in 2031.

The deal is rated triple-A by Moody’s, S&P and Fitch Ratings.

In the competitive arena on Wednesday, Texas A&M University Board of Regents sold $400.1 million of permanent university fund bonds in two offerings.

Barclays Capital won the $309.83 million of Series 2017B taxables with a true interest cost of 3.69%. The issue was priced at par to yield from 1.52% in 2018 to 3.50% in 2034 and 3.66% in 2047.

UBS Financial won the $90.27 million of Series 2017A tax-exempts with a TIC of 2.87%.

Both deals are rated triple-A by Moody’s, S&P and Fitch.

The state of Ohio sold $265 million of bonds in two sales.

JPMorgan Securities won the $175 million of Series 2017A tax-exempt infrastructure improvement general obligation bonds with a TIC of 3.26%. The issue was priced to yield from 1% with a 2% coupon in 2018 to 2.38% with a 5% coupon in 2037.

Fifth Third Securities won the $90 million of Series 2017A taxable Third Frontier Research and Development taxable GOs with a TIC of 2.495%.

The deals are rated Aa1 by Moody’s and AA-plus by S&P and Fitch.

In the short-term competitive sector on Wednesday, the Louisville and Jefferson County Metropolitan Sewer District, Ky., sold $226.34 million of Series 2017 sewer and drainage system subordinated bond anticipation notes.

Citigroup won the notes with a bid of 5% and a premium of $8,811,416.20, an effective rate of 1.041902%. The notes were priced at approximately 103.94 to yield 1% on Nov. 12, 2018.

The BANs are rated MIG1 by Moody’s and SP1-plus by S&P.

There were no surprises on Wednesday, the trader said. “All the deals that came were figured to be well received and that played out.”

He added that “there is enough money around, which has been proven and its being put to work. It continues to be the same theme of too much money around and not enough back up in rates to get people concerned.”

Secondary market
The yield on the 10-year benchmark muni general obligation fell one basis point to 2.00% from 2.01% on Tuesday, while the 30-year GO yield dropped one basis point to 2.81% from 2.82%, according to the final read of Municipal Market Data's triple-A scale.

U.S. Treasuries were little changed on Wednesday. The yield on the two-year Treasury inched up to 1.52% from 1.51% on Tuesday, the 10-year Treasury yield was steady from 2.34% and yield on the 30-year Treasury bond was unchanged from 2.87%.

On Wednesday, the 10-year muni-to-Treasury ratio was calculated at 85.4% compared with 85.9% on Tuesday, while the 30-year muni-to-Treasury ratio stood at 97.8% versus 98.0%, according to MMD.

AP-MBIS 10-year muni slips to 2.32%
The Associated Press-MBIS 10-year municipal benchmark 5% general obligation was at 2.32% in late trade, down from a final reading of 2.33% on Tuesday, according to Municipal Bond Information Services, a national consortium of municipal interdealer brokers.

The AP-MBIS index is a yield curve built on market data aggregated from MBIS member firms and will be updated hourly on the forthcoming Bond Buyer Data Workstation.

MSRB: Previous session's activity
The Municipal Securities Rulemaking Board reported 46,418 trades on Tuesday on volume of $7.71 billion.

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