Municipal bonds ended mixed on Wednesday, according to traders, as the gilt-edged state of Maryland came to market with competitive sales won by Bank of America Merrill Lynch and Citigroup.
Maryland competitively sold about $1.3 billion of general obligation bonds in two separate offerings.
Bank of America Merrill Lynch won the $792.83 million of state and local facilities loan of 2017 Series B tax-exempt refunding GOs with a true interest cost of 1.6566%. The issue was priced as 5s to yield 0.90% in 2019 and 1% in 2020 and to yield from 1.20% in 2022 to 1.81% in 2026.
Citigroup won the $550 million of state and local facilities loan of 2017 Series A tax-exempt GOs with a TIC of 2.2855%. The issue was priced to yield from 0.95% with a 5% coupon in 2020 to 2.95% with a 3% coupon in 2032.
“The $550 million Maryland deal was definitely on the cheaper side, but we will have a better gauge later when we see how the deal actually distributes,” said one New York trader. “I don’t think the market necessarily reacted to the pricing, but it affirmed the weakness in the market.”
Some said that the deals offered more concession than is traditionally seen in this high-quality credit.
“As with mega (Aaa/AAA) Maryland GO sales of the past, the street tends to trade the bonds at a concession until most of the float cleans up,” MMD Senior Market Analyst Randy Smolik said in a Wednesday market comment. “In most recent deals the concession was +2 basis points/+4 basis points. Today's deals offered more concession.”
He added that most maturities with 5% coupons traded 5 basis points over the MMD scale in the first tranche but as much as 6 to 7 basis points over the MMD scale in the second tranche.
Both deals are rated triple-A by Moody’s Investors Service, S&P Global Ratings and Fitch Ratings.
Since 2007 the Old Line State has sold $16.25 billion of securities, with the most issuance before this year occurring in 2014 when it sold $1.89 billion. It saw a low year of issuance 10 years ago when it sold $700 million. Wednesday’s sales put Maryland over the $2 billion mark for the year.
In the negotiated sector on Wednesday, BAML priced the city and county of Honolulu, Hawaii’s $409.22 million of GOs in seven series.
The $176.91 million of Series 2017A tax-exempt GOs were priced to yield from 0.90% with a 5% coupon in 2019 to 2.99% with a 5% coupon in 2042.
The $34.95 million of Series 2017B tax-exempt GOs were priced as 5s to yield from 0.81% in 2018 to 1.82% in 2025.
The $3.5 million of Series 2017C tax-exempt refunding GOS were priced as 5s to yield 0.81% in 2018.
The $137.25 million of Series 2017D tax-exempt refunding GOs were priced as 5s to yield from 1.29% in 2022 to 2.68% in 2033.
The $32.81 million of Series 2017E tax-exempt crossover refunding GOS were priced to yield from 1.29% with a 3% coupon in 2022 to 3.27% with a 3.125% coupon in 2034.
The $3.74 million of Series 2017F taxable crossover refunding GOS were priced at par to yield 1.75% in 2020 and 2.10% in 2021.
The $20.06 million of Series 2017G taxable green GOs were priced at par to yield from 1.375% in 2018 to 4.15% in 2042.
The deal is rated Aa1 by Moody’s and AA-plus by Fitch.
Citi priced the state of Louisiana’s $358.65 million of fuels tax revenue refunding bonds.
The $61.05 million of Series 2017B revenue refunding bonds were priced as 5s to yield from 1.39% in 2023 to 2.30% in 2028.
The $297.61 million of second lien revenue refunding bonds were priced as 5s to yield from 2.28% in 2027 to 3.01% in 2037. A 2040 term bond was priced as 5s to yield 3.11%, a 2045 term was priced as 4s to yield 3.51% and a 2045 term was priced as 5s to yield 3.19%.
The Series 2017B bonds are rated Aa2 by Moody’s and AA by S&P while the Series 2017C bonds are rated Aa3 by Moody’s and AA by S&P.
The yield on the 10-year benchmark muni general obligation rose one basis point to 1.92% from 1.91% on Tuesday, while the 30-year GO yield was steady from 2.78%, according to the final read of Municipal Market Data's triple-A scale.
Treasuries were stronger on Wednesday. The yield on the two-year Treasury dropped to 1.33% from 1.35% on Tuesday, the 10-year Treasury yield declined to 2.23% from 2.26% and the yield on the 30-year Treasury bond decreased to 2.81% from 2.84%.
The 10-year muni-to-Treasury ratio was calculated at 86.3% on Wednesday, compared with 84.5% on Tuesday, while the 30-year muni-to-Treasury ratio stood at 99.0% versus 98.0%, according to MMD.
MSRB: Previous session's activity
The Municipal Securities Rulemaking Board reported 40,561 trades on Tuesday on volume of $8.83 billion.