Tax reform news and interest rates worries have caused muni yields to spike, according to traders, as more supply trickled in.

Secondary market
Top-shelf municipal bonds were weaker Wednesday around midday. The yield on the 10-year benchmark muni general obligation was between three and five basis points higher from 1.92% on Tuesday, while the 30-year GO yield also increased between three and five basis points from 2.78%, according to a read of Municipal Market Data's triple-A scale.

U.S. Treasuries were weaker at midday on Wednesday on fears of rising interest rates and the tax reform proposal. The yield on the two-year Treasury was up to 1.47% from 1.44%, the 10-year Treasury yield increased to 2.30% from 2.23% and the yield on the 30-year Treasury bond rose to 2.85% from 2.77%.

“Details of tax-reform proposals [is] deemed good for growth,” said Randy Smolik, senior market analyst at MMD. “Given lower tax-rates and higher standard deductions, the tax-reform proposal is expected to be a big help for middle incomes, releasing potential buying power to the economy. Dropping the corporate tax rate from 35% to 20% puts U.S. corporations at a better competitive advantage, ensuring a strong employment picture.”

On Tuesday, the 10-year muni-to-Treasury ratio was calculated at 86.1% compared with 86.6% on Monday, while the 30-year muni-to-Treasury ratio stood at 100.3% versus 100.7%, according to MMD.

Primary market
Kicking things off in the competitive arena, Minnesota sold a total of $846.795 million of general obligation trunk highway and refunding taxable bonds in five separate sales. The deals are rated AAA by Fitch Ratings.

Bank of America Merrill Lynch won the largest sale, $312.305 million of GO various purpose refunding bonds with a true interest cost of 2.07%. The bonds were priced to yield from 1.17% with a 5% coupon in 2020 to 2.62% with a 3% coupon in 2030.

Citi won the $312.055 million of GO various purpose bonds with a TIC of 2.74%. No pricing information was immediately available.

Wells Fargo won the $114 million of GO state trunk highway bonds with a TIC of 2.57%. The bonds were priced from 5% at par in 2018 to about 3.245% with a 3.125% coupon in 2037.

BAML also won the $81.435 million of GO trunk highway refunding bonds with a TIC of 1.92%. Wells Fargo won the $27 million of GO taxable various purpose bonds with a TIC of 2.02%.

Since 2007, the Land of 10,000 Lakes has sold about $12.61 billion of securities, with the most issuance in 2010 when it sold $1.71 billion. The state saw the lowest year of issuance in 2008 when it sold $506 million.

BAML priced the New Jersey Economic Development Authority’s $350 million of school facilities construction bonds. The bonds were priced to yield from 1.81% with a 5% coupon in 2019 to 3.97% with a 5% coupon in 2035. A term bond in 2037 was priced to yield 4.13% with a 4% coupon and a term bond in 2042 was priced to yield 4.16% with a 5% coupon. The deal is rated Baa1 by Moody’s, BBB-plus by S&P and A-minus by Fitch.

BAML priced Wayne County Airport Authority’s $279.515 million of revenue bonds. The $51.12 million of Series 2017A non-alternative minimum tax airport revenue bonds was priced to yield from 1.23% with a 4% coupon in 2020 to 3.21% with a 5% coupon in 2037. A term bond in 2042 was priced to yield 3.34% with a 5% coupon. A term bond in 2047 was priced to yield 3.41% with a 5% coupon.

The $41.25 million of Series 2017B AMT bonds were priced to yield from 1.46% with a 4% coupon in 2020 to 3.44% with a 5% coupon in 2037. A term bond in 2042 was priced to yield 3.57% with a 5% coupon. A term bond in 2047 was priced to yield 3.64% with a 5% coupon.

The $78.74 million of Series 2017C non-AMT bonds were priced to yield from 0.98% with a 5% coupon in 2018 to 2.64% with a 5% coupon in 2028. These series are all rated A2 by Moody’s and A by S&P and Fitch.

The $61.965 million of Series 2017A junior lien non-AMT bonds were priced to yield from 1.13% with a 5% coupon in 2018 to 3.33% with a 5% coupon in 2037. This series is rated A3 by Moody’s, A-minus by S&P and A by Fitch, with the exceptions of the 2033 through 2036 maturities, which are insured by Assured Guaranty Municipal Corp. and rated A2 by Moody’s and AA by S&P.

The $46.44 million of Series 2017B junior lien AMT bonds were priced to yield from 1.36% with a 5% coupon in 2018 to 3.29% with a 5% coupon in 2032. This series is rated A3 by Moody’s, A-minus by S&P and A by Fitch.

MSRB: Previous session's activity
The Municipal Securities Rulemaking Board reported 41,445 trades on Tuesday on volume of $8.038 billion.

Bond Buyer reports 30-day visible supply
The Bond Buyer's 30-day visible supply calendar decreased $2.643 billion to $13.59 billion on Wednesday. The total is comprised of $4.69 billion of competitive sales and $8.90 billion of negotiated deals.

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Aaron Weitzman

Aaron Weitzman

Aaron Weitzman is a markets reporter for The Bond Buyer, focusing on the sell side of the municipal bond market.