UVA offers $300M 100-year bond as municipals finish mixed

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Top quality municipal bonds ended mixed on Thursday, traders said, as the market saw the University of Virginia come to market with a 100-year taxable bond offering.

Primary market
In the negotiated sector, Barclays Capital priced the Rector and Visitors of the University of Virginia’s $300 million of Series 2017C taxable general revenue pledge bonds issued under the multi-year capital project financing program.

The Century Bonds were priced at par to yield 4.179% in a bullet maturity due on Sept. 1, 2117; the bonds are not callable until March 1, 2117 with a make whole call at the Treasury rate plus 25 basis points.

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

Morgan Stanley received the written award on Atlantic City, N.J.’s $68.33 million of Series 2017B tax appeal refunding bonds issued as qualified under the “provisions of the Municipal Qualified Bond Act, P.L. 1976, C.28, as amended.”

The deal was backed by Assured Guaranty Municipal and rated A2 by Moody’s and AA by S&P and carries MQBA underlying ratings of Baa1 from Moody’s and BBB-plus from S&P.

The issue was priced to yield from 1.19% with a 2% coupon in 2018 to 2.66% with a 5% coupon in 2027. A 2032 maturity was priced as 5s to yield 3.05%, a 2037 maturity was priced as 5s to yield 3.29% and a 2042 maturity was priced as 4s to yield 3.80%.

In the competitive arena, the Cherry Creek School District No. 5, Colo., sold $178.34 million of unlimited tax general obligation bonds.

Hutchinson Shockey won the $100 million of Series 2017C GOs with a true interest cost of 3.21% while Raymond James & Associates won the $78.34 million of Series 2017B GOs with a TIC of 1.897%.

The deal is rated Aa1 by Moody’s and AA-plus by S&P.

Secondary market
The yield on the 10-year benchmark muni general obligation rose one basis point to 1.93% from 1.92% on Wednesday, while the 30-year GO yield was unchanged from 2.80%, according to the final read of Municipal Market Data's triple-A scale.

U.S. Treasuries were little changed on Thursday. The yield on the two-year Treasury was unchanged from 1.44% on Wednesday, the 10-year Treasury yield was flat from 2.27% and the yield on the 30-year Treasury bond decreased to 2.81% from 2.82%.

On Thursday, the 10-year muni-to-Treasury ratio was calculated at 84.8% compared with 84.4% on Wednesday, while the 30-year muni-to-Treasury ratio stood at 99.9% versus 99.3%, according to MMD.

MSRB: Previous session's activity
The Municipal Securities Rulemaking Board reported 40,733 trades on Wednesday on volume of $11.78 billion.

Tax-exempt money market funds see inflows
Tax-exempt money market funds experienced inflows of $236.6 million, raising total net assets to $128.23 billion in the week ended Sept. 18, according to The Money Fund Report, a service of iMoneyNet.com.

This followed an outflow of $692.4 million to $127.99 billion in the previous week.
The average, seven-day simple yield for the 226 weekly reporting tax-exempt funds moved up to 0.37% from 0.34% the previous week.

The total net assets of the 836 weekly reporting taxable money funds decreased $25.08 billion to $2.557 trillion in the week ended Sept. 19, after an inflow of $24.36 billion to $2.582 trillion the week before.

The average, seven-day simple yield for the taxable money funds rose to 0.68% from 0.67% the prior week.

Overall, the combined total net assets of the 1,062 weekly reporting money funds decreased $24.85 billion to $2.685 trillion in the week ended Sept. 19, after inflows of $23.7 million to $2.710 trillion in the prior week.

Nuveen looks at high-yield munis vs. corporates
Nuveen this week looks at high-yield municipal and corporate bonds and how yield ratios and credit spreads are used to compare their relative value.

“The yield ratio is currently 96%, versus the long-term average of 81%, John Miller, co-head of fixed income at Nuveen Asset Management, writes in this week’s market comment.

He notes that high-yield municipal credit spreads (excluding Puerto Rico) are 264 basis points over AAA-rated munis, which is about 50 basis points higher than at this time last year.

“High-yield corporate bond spreads are 340 basis points over U.S. Treasury yields, 135 basis points below this time last year,” Miller said. “By both measures, high-yield municipals appear cheaper.”

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Primary bond market Secondary bond market Municipal bond funds Cherry Creek School District No. 5, CO City of Atlantic City, NJ