Top-quality municipal bonds ended narrowly mixed on Tuesday, traders said, as the hefty California and New York City sales were priced for institutions.
Citigroup priced and repriced the state of California's $2.79 billion of various purpose general obligation bonds after a one-day retail order period. The size was increased from $2.45 billion.
The $513.53 million of various purpose GO bonds were repriced to yield 0.60% with a 2% coupon in 2017 and to yield from 1.41% with a 5% coupon in 2020 to 2.35% with a 5% coupon in 2024; a split 2046 maturity was priced as 4s to yield 3.90% and as 5s to yield 3.52%.
The $2.28 billion of various purpose GO refunding bonds were repriced to yield from 0.85% with a 5% coupon in 2018 to 3.85% with a 4% coupon and 3.45% with a 5% coupon in a split 2038 maturity.
The deal is rated Aa3 by Moody's Investors Service and AA-minus by S&P Global Ratings and Fitch Ratings.
Since 2007, the Golden State has sold about $97.24 billion of bonds, with the most issuance coming in 2009 when it offered $23.18 billion. The state has issued more than $6 billion every year except for 2011 and 2012 in that period. Last year California was the biggest municipal bond issuer in the country.
A New York trader said that earlier in the day the consensus on the street was that the deal would be more of a blowout than it ended up being, with some forecasting an upsizing to $3.5 billion.
"I think it signals a little tentativeness in the market," he said. "The Federal Reserve is meeting next week and a probable [by most people's expectations] rate hike and then you have people worried about the next Tweet in the short-term to tax-reform in the long-term, there are a lot of cross currents right now."
JPMorgan Securities repriced the New York City Transitional Finance Authority's $800 million of future tax secured subordinate refunding bonds for institutions after holding a two-day retail order period.
The $761.12 million of Fiscal 2017 Series C future tax secured tax-exempt subordinated bonds were repriced for institutions to yield from 0.90% with 4% coupon in 2018 to 3.61% with a 3.50% coupon and 3.60% with a 4% coupon in a split 2034 maturity.
The $38.88 million of Fiscal 2017 Series D future tax secured tax-exempt subordinated bonds were repriced for institutions to yield from 0.65% with a 2% coupon in 2017 to 3.61% with a 3.50% coupon in 2034.
The deal is rated Aa1 by Moody's and triple-A by S&P and Fitch.
Goldman Sachs priced and repriced the New Jersey Educational Facilities Authority's $338.44 million of Series 2017B revenue refunding bonds for Princeton University.
The issue was repriced to yield from 0.78% with a 5% coupon in 2018 to 2.24% with a 5% coupon in 2025 and to yield from 2.45% with a 5% coupon in 2027 to 3.38% with a 4% coupon in 2036.
The deal is rated triple-A by Moody's and S&P.
In the competitive arena on Tuesday, Wisconsin sold $340.39 million of Series 2017 unlimited tax GOs. Citi won the bonds with a true interest cost of 3.44%. The issue was priced as 5s to yield from 1.67% in 2022 to 3.18% in 2037. The deal is rated Aa2 by Moody's and AA by S&P and Fitch.
Boston sold $150 million of Series 2017A unlimited tax GOs. Citi won the deal with a TIC of 2.67%. The issue was priced to yield from 0.77% with a 5% coupon in 2018 to 3.46% with a 3.25% coupon in 2037. The deal is rated triple-A by Moody's and S&P.
Sullivan County, Tenn., competitively sold $135.74 million of Series 2017 GOs. Wells Fargo Securities won the deal with a TIC of 3.07%. The issue was priced to yield from 1.14% with a 5% coupon in 2019 to 3.82% with a 3.75% coupon in 2047. The deal is rated Aa2 by Moody's.
The Springdale School District No. 50, Ark., competitively sold $128.8 million of limited tax GO refunding bonds on Tuesday. Morgan Stanley won the bonds with a TIC of 3.65%. Pricing information was not available. The deal is rated Aa2 by Moody's.
Secondary Market
The 10-year benchmark muni general obligation yield on Tuesday was unchanged from 2.42% on Monday, while the yield on the 30-year GO rose one basis point to 3.19% from 3.18%, according to the final read of Municipal Market Data's triple-A scale.
U.S. Treasuries were weaker on Tuesday. The yield on the two-year Treasury rose to 1.33% from 1.30% on Monday, while the 10-year Treasury yield gained to 2.51% from 2.49%, and the yield on the 30-year Treasury bond increased to 3.11% from 3.10%.
The New York trader noted that as far as an interest rate hike goes, how much of the short-end that has already factored in is "more than you think" and remembered that last time there was a rate hike, the market rallied.
"But now, unlike before, there are enough things to be concerned about in the larger picture," he said. "There is money building but it doesn't feel like there are a lot of people rushing to sell. The underwriters aren't trying to be heroes, the deals aren't blowouts and the Cal deal today was a good example of where the market is as far as tentativeness goes."
The 10-year muni to Treasury ratio was calculated at 96.3% on Tuesday compared to 97.1% on Monday, while the 30-year muni to Treasury ratio stood at 102.5%, versus 102.7%, according to MMD.
MSRB: Previous Session's Activity
The Municipal Securities Rulemaking Board reported 37,720 trades on Monday on volume of $8.17 billion.
