Municipals resume rally as DASNY notes, Houston, Connecticut bonds top slate

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Municipals bond resumed their rally on Thursday as traders saw some big new issues come to market that were repriced to sharply lower yields.

Triple-A muni yields were down as much as seven basis points on the long end of the curve even as the short end weakened. Stock prices plunged as Treasury prices rose.
Meanwhile, Refinitiv Lipper reported $2.759 billion inflows into municipal bond funds in week ended June 10. This is another week of inflows that both Lipper and the Invesetment Company Institute are reporting and these inflows are the largest since the first month of the year.

Traders said a flight-to-safety bid is occurring in the municipal market as ratios to U.S. Treasuries become more inviting and investors begin to become more comfortable with credits and a potential recovery from the coronavirus-led havoc.

“The strength of today's market was reflected in the repricing of two major loans in the new-issue market,” said Peter Franks, senior market analyst at Refinitiv Municipal Market Data. “The (A1/A) $400 million Connecticut GO deal … was bumped seven to eight basis points in the front and 10-15 boint points out long. The Houston Texas Utility Revs … [were] bumped five-11 basis points from front to back.”

Primary market
Citigroup priced and repriced the Dormitory Authority of the State of New York’s (MIG1/SP1+/NR/NR) $3.382 billion of state personal income tax subordinate general purpose revenue anticipation notes.

The DASNY RANs were repriced with a 5% coupon at 103.483 to yield 0.55% in March 2021.

With the pent-up demand on the buy side, the New York Dormitory Authority note deal was a welcome sight to many buyers.

“There were lots of investors and it was very well received,” a New York trader said.

The demand was so strong underwriters were able to lower yields to 0.55% from 0.65%, the trader noted.

Wells Fargo Securities priced and repriced Houston, Texas’ (Aa2/NR/AA/NR) $435.165 million of combined utility system first lien revenue and refunding bonds to lower yields.

Wells Fargo also priced Houston’s $ 178.695 million of taxable combined utility system first lien revenue refunding bonds.

The exempts were repriced to yield from 0.24% with a 5% coupon in 2021 to 2.27% with a 2.50% coupon in 2040. A 2043 term was repriced to yield 1.92% with a 4% coupon a 2045 term was repriced to yield 1.80% with a 5% coupon, a 2047 term was repriced to yield 2.34% with a 3% coupon and a 2049 term was repriced to yield 2.01% with a 4% coupon.

The bonds had been tentatively priced to yield from 0.24% with a 5% coupon in 2021 to 2.27% in 2040. A 2043 term was priced to yield 2.03% with a 4% coupon a 2045 term was priced to yield 1.91% with a 5% coupon, a 2047 term was priced to yield 2.40% with a 3% coupon and a 2049 term was priced to yield 2.12% with a 4% coupon.

Morgan Stanley priced and repriced the state of Connecticut’s (A1/A/A+/AA-) $400 million of Series 2020C general obligation bonds.

The deal was repriced to yield from 0.50% with a 3% coupon in 2021 to 2.72% with a 3% coupon and 2.22% with a 5% coupon in a split 2040 maturity.

The deal had been tentatively priced to yield from 0.60% with a 3% coupon in 2021 to 2.82% with a 3% coupon and 2.37% with a 5% coupon in a split 2040 maturity.

The deal was priced on Wednesday for retail to yield from 0.63% with a 3% coupon in 2021 to 2.87% with a 3% coupon in 2040.

BofA Securities priced and repriced Tampa, Fla.’s (A2/A-/NR/NR) $260.7 million of hospital revenue bonds for the H. Lee Moffit Cancer Center to lower yields.

The bonds were repriced to yield from 0.98% with a 5% coupon in 2021 to 2.57% with a 5% coupon in 2040; a 2045 term was priced to yield 2.88% with a 4% coupon and a 2050 term was priced to yield 2.68% with a 5% coupon.

The bonds had been tentatively priced to yield from 1.18% with a 5% coupon in 2021 to 2.87% with a 5% coupon in 2040; a 2045 term was priced to yield 3.28% with a 4% coupon and a 2050 term was priced to yield 3.08% with a 5% coupon.

BofA also priced and Tampa’s (A1/A+/NR/NR) $119.979 million of capital improvement cigarette tax allocation bonds capital appreciation bonds. The CABs were priced with yields to maturity ranging from 3.55% in 2033 to 4.05% in 2042, 4.08% in 2045, 4.12% in 2049 and 4.18% in 2053.

Barclays Capital priced the Board of Regents of the State of Utah’s (Aa1/AA+/NR/NR) $105.135 million of general revenue bonds for the University of Utah.

The $75.02 million of Series 2020A bonds were priced to yield from 0.64% with a 5% coupon in 2036 to 1.87% with a 4% coupon in 2040.

The $20.115 million of taxable were priced at par to yield from 0.577% in 2021 to 1.866% in 2031.

Secondary market
Some notable trades:

On the short end, Delaware GOs, 5s of 2022, traded at 0.20%. Utah 5s of 2022 were at 0.25%-0.24%. Houston, Texas ISD, ts of 2023, at 0.32%. Wake County, NC GOs, 5 of 2024 at 0.33%.

Collin County, Texas Community College 5s of 2026 landed at 0.63%.

Prince Georges County, Maryland, GOs, 5s in the 10-year traded at 0.95%. Wednesday they were at 1.02%, a seven basis point drop.

Forsyth County School District 5s of 2032 traded at 1.05%-1.04% compared to Tuesday at 1.09%.

Texas waters, 4s of 2035 were trading in blocks at 1.47%-1.42% from the original yield of 1.67%.

Waller, Texas ISD 4s of 2050 traded at 1.85%.

On MMD’s AAA benchmark scale, yields on the 2021 to 2023 maturities rose with the 2021 up two basis points to 0.20%, the 2022 up one basis point to 0.22% and the 2023 gained one basis point to 0.24%. The yield on the 10-year GO muni fell three basis points to 0.85% while the 30-year dropped seven basis points to 1.61%.

The 10-year muni-to-Treasury ratio was calculated at 130.0% while the 30-year muni-to-Treasury ratio stood at 114.4%, according to MMD.

The ICE AAA municipal yield curve also showed short yields rising with the 2021 and 2022 maturities up one basis point to 0.180% and 0.205%, respectively, while the 2023 maturity was unchanged at 0.250%y. Out longer the 10-year fell four basis points to 0.818% and the 30-year dropped six basis points to 1.614%.

ICE reported the 10-year muni-to-Treasury ratio stood at 128% while the 30-year ratio was at 114%.

The IHS Markit municipal analytics AAA curve showed the 2021 maturity yielding 0.19%, the 2022 maturity at 0.24% and the 2023 maturity at 0.25% while the 10-year muni was at 0.84% and the 30-year stood at 1.61%.

The BVAL curve showed the 2021 maturity rise 1 basis point at 0.13% and the 2022 also one basis point up at 0.19%. BVAL calculated the 10-year muni fell three xx basis points to 0.80% while the 30-year fell seven basis points to 0 1.63%.

Munis were mixed on the MBIS benchmark scale.

Treasuries were stronger as stocks traded lower.

The three-month Treasury note was up to yield 0.173%, the 10-year Treasury was yielding 0.654% and the 30-year Treasury was yielding 1.407%.

The Dow dropped 6.25%, the S&P 500 decreased 5.41% and the Nasdaq fell 4.70%.

Money market muni funds fall $530M
Tax-exempt municipal money market fund assets fell $530.3 million, bringing total net assets to $133.95 billion in the week ended June 8, according to the Money Fund Report, a publication of Informa Financial Intelligence.

The average seven-day simple yield for the 187 tax-free and municipal money-market funds dipped to 0.04% from 0.05% in the previous week.

Taxable money-fund assets decreased $24.31 billion in the week ended June 9, bringing total net assets to $4.534 trillion.

The average, seven-day simple yield for the 793 taxable reporting funds was unchanged at 0.08%.

Overall, the combined total net assets of the 980 reporting money funds dropped $24.8436 million to $4.668 trillion in the week ended June 9.

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Primary bond market Secondary bond market Municipal bond funds Connecticut New York State Dormitory Authority
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