Municipals remain strong as Montgomery County sells GOs

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Municipals remained stronger on Wednesday as Montgomery County, Maryland, came to market with a triple-A-rated general obligation bond offering.

“Municipal rates are generally lower in the longer end of the curve. Specifically, the yields are one basis point lower from the seven-year through the longer dated maturities,” ICE Data Services said in a market comment late Wednesday. “The high yield market is fairly unchanged, as it doesn’t feel quite as firm as the broader market.”

Treasury strength gave municipals a lift on Wednesday, as new issues continued to price, market participants said.

“The municipal market is firm this morning, although not quite keeping up with Treasury market strength,” Alan Schankel, managing director of credit strategy at Janney Capital Markets said Wednesday. “It was no surprise that ICI reported $1.4 billion of muni fund outflows for the week ended October 17, confirming Lipper’s outflow data from last week.”

Primary market
Montgomery County competitively sold $330 million of consolidated public improvement GOs of 2018, Series A.

Citigroup won the bonds with a true interest cost of 3.2796%.

Proceeds will be used to refinance certain commercial paper bond anticipation notes, which financed capital projects in the county.

The financial advisor is Davenport & Co. and the bond counsel is McKennon Shelton.

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

Since 2008, the county has sold over $5.5 billion of debt with the most issuance occurring in 2017 when it offered $857 million of bonds. It sold the least amount of debt in 2008 when it issued about $340 million.
In the negotiated sector, JPMorgan Securities priced San Antonio’s $217.06 million of new series of 2018 electric and gas systems revenue refunding bonds.

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

Citi priced the New York Metropolitan Transportation Authority’s $175.45 million of transportation revenue variable rate bonds. The deal is rated A1 by Moody’s, A by S&P, AA-minus by Fitch and AA-plus by Kroll Bond Rating Agency.

JPMorgan received the official award on the Tarrant County Cultural Educational Facilities Finance Corp., Texas’ $443.35 million of Series 2018AB revenue and refunding bonds for Christus Health. The deal is rated A1 by Moody’s and A-plus by S&P.

On Thursday, Barclays Capital is expected to price the Phoenix Civic Improvement Corp.’s $230 million of Series 2018 senior lien airport revenue bonds subject to the alternative minimum tax. The deal is rated Aa3 by Moody’s and AA-minus by S&P.

In the short-term competitive sector, the Chicago Board of Education is selling $200 million of Series 2018A tax anticipation notes on Thursday. Financial advisors are PFM Financial Advisors and Columbia Capital Management; the bond counsel are Ice Miller and Pugh Jones Johnson.

Bond sale results

Maryland
Click here for the Montgomery County sale

Texas
Click here for the Tarrant award

Click here for the San Antonio deal

New York
Click here for the MTA pricing

Bond Buyer 30-day visible supply at $6.18B
The Bond Buyer's 30-day visible supply calendar decreased $1.83 billion to $6.18 billion for Wednesday. The total is comprised of $1.97 billion of competitive sales and $4.21 billion of negotiated deals.

Secondary market
Municipal bonds were mostly stronger on Wednesday, according to a late read of the MBIS benchmark scale. Benchmark muni yields fell as much as one basis point in the one- to 27-year maturities, rose less than a basis point in the 29- and 30-year maturities and remained unchanged in the 28-year maturity.

High-grade munis were stronger, with yields calculated on MBIS' AAA scale falling as much as one basis point in the one- to 30-year maturities.

Municipals were mixed on Municipal Market Data’s AAA benchmark scale, which showed the yield on the 10-year muni general obligation remaining unchanged while the yield on 30-year muni maturity dropped as much as one basis point.

Treasury bonds were stronger as stocks traded lower.

On Wednesday, the 10-year muni-to-Treasury ratio was calculated at 86.5% while the 30-year muni-to-Treasury ratio stood at 99.9%, 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 42,053 trades on Tuesday on volume of $12.52 billion.

California, New York and Texas were the municipalities with the most trades, with the Golden State taking 14.192% of the market, the Empire State taking 12.26% and the Lone Star State taking 10.09%.

Puerto Rico muni prices mostly weaker
On Tuesday, the Puerto Rico Oversight Board approved a revised five-year fiscal plan. Bonds continued remained off the highs reached on Monday after the release of the plan’s details.

In active trading on Wednesday, the Puerto Rico benchmark Series 2014A 8% general obligation bonds of 2035 were trading at a high price of 59.3 cents on the dollar compared to 60 cents on Tuesday and 60.875 cents on Monday, according to the Municipal Securities Rulemaking Board’s EMMA website. Last week the bonds were trading at 54.75 cents on the dollar.

Trading volume for the 8% GOs totaled $42.33 million in 12 trades on Wednesday compared to $33.66 million in 18 trades on Tuesday and $90.795 million in 40 trades on Monday.

The Commonwealth Series 2012A 5% GO public improvement refunding bonds of 2041 were trading at a high price of 60.25 cents on the dollar on Wednesday compared to 58 cents on Tuesday and 61.75 cents on Monday, according to EMMA. Trading volume totaled $14.62 million in 16 trades compared to $295,000 in eight trades on Tuesday and $78.59 million in 37 trades on Monday.

The Puerto Rico Sales Tax Financing Corp.’s first subordinate Series 2009B 6.05% sales tax revenue bonds traded at a high price of 47.875 cents on the dollar compared to 48.125 cents on Tuesday and 47.39 on Monday. Trading volume totaled $1.65 million in 11 trades compared to $9.06 million in two trades on Tuesday and $600,000 in 11 trades on Monday.

Treasury sells 2-year FRNs
The Treasury Department Wednesday auctioned $19 billion of two-year floating rate notes with a high discount margin of 0.045%, at a 0.045% spread, a price of par. The bid-to-cover ratio was 3.32.

Tenders at the high margin were allotted 88.76%. The median discount margin was 0.040%. The low discount margin was 0.020%.

The index determination date is Oct. 22 and the index determination rate is 2.300%.

Treasury auctions 5-year notes
Treasury also auctioned $39 billion of five-year notes, with a 2 7/8% coupon, a 2.977% high yield, a price of 99.529382. The bid-to-cover ratio was 2.30.

Tenders at the high yield were allotted 48.65%. All competitive tenders at lower yields were accepted in full. The median yield was 2.940%. The low yield was 2.850%.

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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