Top-rated municipal bonds finished mixed on Tuesday, according to traders, as the first of the week's new issues hit the screens ahead of the Federal Reserve meeting on monetary policy.
The Federal Open Market Committee meets on Tuesday and Wednesday. Having raised the target range for the federal funds rate to ½-to-3/4 percent at its last meeting, the FOMC is expected to take no action on rates at this meeting, though economists expect the panel to raise the target three times this year.
This week's new issue slate is estimated at $4.03 billion, comprised of $3.37 billion of negotiated deals and $661.4 million of competitive sales.
Barclays Capital priced the New York City Municipal Water Finance Authority's $342.1 million of Fiscal 2017 Series DD water and sewer system second general resolution revenue bonds for institutional investors after a one-day retail order period on Monday.
The deal was offered to institutions as a four-way split 2047 maturity and priced as 3 3/4s to yield 3.88%, as 4s to yield 3.83% and as 5s to yield 3.53%, and as 5 1/4s to yield 3.43%.
The bonds are rated Aa1 by Moody's Investors Service and AA-plus by S&P Global Ratings and Fitch Ratings.
Goldman Sachs priced and repriced the District of Columbia Water and Sewer Authority's $300 million of public utility senior lien revenue bonds and revenue green bonds on Tuesday. The $100 million of public utility senior lien revenue bonds, Series 2017A of green bonds were repriced to yield 3.68% with a 4% coupon in 2047 and to yield 3.48% with a 5% coupon in 2052.
The $200 million of public utility senior lien revenue bonds, Series 2017B were repriced to yield from 1.02% with a 5% coupon in 2018 to 3.24% with a 5% coupon in 2040. A term bond in 2044 was priced to yield 3.65% with a 4% coupon. The deal is rated Aa1 and GB1 by Moody's and triple-A by S&P.
"We successfully priced our deal today, which was oversubscribed with $427 million orders for the $300 million bonds offered," said Mark Kim, chief financial officer for D.C. Water. "We saw equal demand for the Authority's green bonds and traditional bonds, as investors preferred a mix of 4% and 5% coupon bonds on the long end of the curve."
Kim said that the deal represents the Authority's third green bond sale and carried Moody's highest green bond assessment rating of GB1. "The sale also marks the Authority's first AAA-rated deal since being upgraded by S&P last year," said Kim. "We tightened spreads on the front end of the curve by lowering yields by 1-6 basis points in 2018-2026."
Wells Fargo Securities priced the Oklahoma Turnpike Authority's $479.83 million of Series 2017A second senior revenue bonds and Series 2017B refunding second senior revenue bonds for retail investors on Tuesday, ahead of the institutional pricing on Wednesday.
The Series 2017A bonds were priced to yield from 3.57% with a 3.5% coupon and as 5s with a 3.15% coupon in a split 2032 maturity to 3.40% with a 5% coupon in 2038; a split 2042 maturity was priced as 4s to yield 3.90% and as 5s to yield 3.43%; and a 2047 maturity was priced as 4s to yield 3.95%.
The Series 2017B bonds were priced to yield from 0.93% with a 3% coupon in 2018 to 1.86% with 2% and 3% coupons in a split 2022 maturity.
The deal is rated Aa3 by Moody's and AA-minus by S&P and Fitch.
Citigroup priced the University of Colorado Hospital Authority's $276.09 million of Series 2017C-1 and Series 2017C-2 revenue put bonds.
The Series 2017C-1 bonds were priced as 4s to yield 1.62% in 2047 with a mandatory put date of 2020. The Series 2017C-2 bonds were priced as 5s to yield 2.08% in 2038 with a mandatory put date of 2022.
The deal is rated Aa3 by Moody's and AA-minus by S&P and Fitch.
In the competitive arena on Tuesday, the University System of Maryland sold $115 million of Series 2017A tax-exempt auxiliary facility and tuition revenue bonds.
JPMorgan Securities won the deal with a true interest cost of 3.15%. The issue was priced to yield from 0.96% with a 5% coupon in 2018 to 3.39% with a 4% coupon in 2037.
The system also competitively sold $52.26 million of Series 2017B tax-exempt auxiliary facility and tuition refunding revenue bonds. Citigroup won the deal with a TIC of 1.57%.
Both deals are rated Aa1 by Moody's and AA-plus by S&P and Fitch.
Since 2007, the system has issued about $1.67 billion of debt, with the largest issuance occurring in 2010 when it sold roughly $286 million of debt. The system did not come to market at all in 2013. With Tuesday's sales, it is only about $35 million away from equaling last year's total and has already beat the yearly issuances of 2015 and 2014.
Secondary Market
The 10-year benchmark muni general obligation yield fell one basis point to 2.32% from 2.33% on Monday, while the yield on the 30-year GO dropped was unchanged from 3.08%, according to the final read of Municipal Market Data's triple-A scale.
U.S. Treasuries were stronger on Tuesday. The yield on the two-year Treasury dipped to 1.20% from 1.21% on Monday, while the 10-year Treasury yield fell to 2.45% from 2.48%, and the yield on the 30-year Treasury bond decreased 3.05% from 3.08%.
The 10-year muni to Treasury ratio was calculated at 93.8% on Tuesday compared to 93.8% on Monday, while the 30-year muni to Treasury ratio stood at 100.0%, versus 100.0%, according to MMD.
MSRB: Previous Session's Activity
The Municipal Securities Rulemaking Board reported 40,006 trades on Monday on volume of $8.08 billion.
