Top shelf municipal bonds finished steady to stronger on Wednesday, traders said, as more supply hit the market with the retail pricing of the Massachusetts Water Resources Authority’s bond deal leading the way.
Primary Market
Citigroup priced the MWRA's $514.62 million of general revenue bonds for retail investors ahead of the institutional pricing on Thursday.
The $66.05 million of Series 2016B general revenue bonds were priced for retail as 3s to yield 0.69% in 2018, 0.80% in 2019 and 0.93% in 2020; and to yield from 1.39% with a 4% coupon in 2023 to 2.47% with a 5% coupon in 2036; a 2040 term bond was priced as 5s to yield 2.63%. A 2017 maturity was offered as a sealed bid.
The $448.57 million of Series 2016C general revenue refunding green bonds were priced for retail to yield from 1.25% with a 4% coupon in 2022 to 1.77% with a 4% coupon in 2026, as 5s to yield 2.18% in 2031, as 4s to yield 2.77% in 2036 and as 4s to yield 2.93% in a split half of a 2040 maturity. There were no retail order taken in the 2021, 2027-2030, 2032-2035 maturities or in half of the 2040 split maturity. A 2017 maturity was offered as a sealed bid.
The deal is rated Aa1 by Moody's Investors Service and AA-plus by Standard and Poor's and Fitch Ratings. All three rating agencies have a stable outlook on the credit.
Since 2006, the MWRA has issued nearly $5 billion of debt, with the most issuance occurring in 2008 when $1.16 billion of bonds were sold. The authority didn’t come to market in 2015 and only sold $171 million in 2013.
Raymond James priced the Board of Regents of the University of Texas System’s $133.47 million of Series 2016C revenue financing system refunding bonds on Wednesday.
The issue was priced to yield from 0.73% with a 4% coupon in 2018 to 1.81% with a 5% coupon in 2026. A 2017 maturity was offered as a sealed bid. The deal is rated triple-A by Moody’s, S&P and Fitch.
Goldman Sachs priced the Orange County Health Facilities Authority, Fla.’s $242.68 million of Series 2016A hospital revenue refunding bonds and Series 2016B hospital revenue bonds for the Orlando Health Obligated Group.
The $175.6 million of Series 2016A bonds were priced to yield from 1.11% with a 3% coupon in 2019 to 1.81% with a 5% coupon in 2023 and from 2.35% with a 5% coupon in 2027 to 3.02% with a 5% coupon in 2037; a 2039 maturity was priced as 5s to yield 3.04% and a 2040 maturity was priced as 3 1/2s to yield 3.625%. The $67.08 million of Series 2016B bonds were priced as 5s to yield 3.13% in 2044 and 3.58% in 2045. The deal is rated A2 by Moody’s and A by S&P and Fitch.
Ziegler priced the Illinois Finance Authority’s $102.99 million of Series 2016 A&B revenue bonds and notes for the Presbyterian Homes Obligated Group.
The $69.99 million of Series A bonds were priced to yield from 0.75% with a 2% coupon in 2016 to 2.98% with a 5% coupon in 2031.The $33 million of Series 2016B floating-rate notes with a maturity date of 2036 were tentatively priced at about 145 basis points over the one-month LIBOR, with interest to be reset monthly and a mandatory hard put in 2021. The Series A bonds are rated A-minus by Fitch while the Series B FRNs are rated triple-B-plus by S&P and A-minus by Fitch.
JPMorgan Securities priced the Denton Independent School District, Texas’ $118.75 million of Series 2016 unlimited tax refunding bonds.
The current interest bonds were priced as 2s to yield 0.60% in 2016 and to yield from 1.78% with a 5% coupon in 2025 to 2.48% with a 4% coupon and 2.27% with a 5% coupon in a split 2031 maturity and to yield from 2.69% with a 4% coupon in 2034 to 2.90% with a 4% coupon in 2038. The capital appreciation zero coupon bonds were priced to yield from 1.47% in 2020 to 2.24% in 2025. The issue is backed by the Permanent School Fund guarantee program and rated triple-A by S&P and Fitch.
Piper Jaffray received the written award on the Keller Independent School District, Texas’ $126.94 million of Series 2016 A&B unlimited tax refunding bonds. The $70.92 million of Series A bonds were priced as 2s to yield 0.52% in 2016 and from 1.07% with a 5% coupon in 2020 to 2.24% with a 5% coupon in 2031. The $56.02 million of Series B bonds were priced as 2s to yield 0.55% in 2016 and to yield from 0.83% with a 2% coupon in 2018 to 2.24% with a 5% coupon in 2031. The issue is backed by the PSF and rated triple-A by Moody’s and S&P.
Ramirez priced the city of Buffalo, N.Y.’s $52.70 million of Series 2016A general improvement bonds with a top yield of 2.17% in 2028 and Series 2016B general obligation refunding bonds with a top yield of 1.62% in 2023. The deal is rated A1 by Moody’s and A-plus by S&P and Fitch.
Secondary Market
The yield on the 10-year benchmark muni general obligation was steady from 1.62% on Tuesday, while the 30-year muni yield fell one basis point to 2.56% from 2.57%, according to the final read of Municipal Market Data's triple-A scale.
U.S. Treasuries were narrowly mixed on Wednesday. The yield on the two-year Treasury rose to 0.75% from 0.73% on Tuesday, while the 10-year Treasury yield fell to 1.76% from 1.78% and the yield on the 30-year Treasury bond declined to 2.58% from 2.60%.
The 10-year muni to Treasury ratio was calculated at 92.0% on Wednesday compared with 91.0% on Tuesday, while the 30-year muni to Treasury ratio stood at 99.3% versus 98.6%, according to MMD.
Requests for New Muni CUSIPs Rise in March
Demand for new municipal CUSIP identifiers rose 26% in March, the second straight monthly rise, CUSIP Global Services said in a report released on Tuesday.
A total of 1,430 new muni bond identifier requests were made in March, up from 1,137 in February.
The report tracks requests by issuers for bond identifiers as an early indicator of new volume and suggests a resurgence of municipal issuance in the next several weeks.
On a year-over-year basis, however, March municipal bond identifier requests were down 6% from 2015.
In the first quarter, total municipal CUSIP orders totaled 3,935, down almost 5% from 4,131 in the first three months of 2015.
“After a slow start to the year, CUSIP issuance volume has accelerated rapidly in February and March,” Gerard Faulkner, director of operations for CUSIP Global Services, said in a press release. “Current levels of activity suggest that we’ll be seeing an active pace of new security issuance throughout the spring.”
In the short-term sector, long-term muni note CUSIP order volume rose to 25 in March compared to 19 in February. Short-term note muni CUSIP orders increased to 91 last month from 57 in February.
Regionally, municipal bond issuers in Texas asked for the most new CUSIP identifiers in March, accounting for a total of 158 requests. In the first quarter, Texas bond issuers accounted for 11% of all municipal CUSIP request volume.
