Top quality municipal bonds finished mostly steady on Monday, traders said, as the first of the week's supply started to come to market with the University of Connecticut offering bonds to retail investors.
Secondary Market
The yield on the 10-year benchmark muni general obligation was flat from 1.70% on Friday, while the 30-year muni yield was steady from 2.68%, according to the final read of Municipal Market Data's triple-A scale. Yields on some intermediate maturities were one basis point weaker.
U.S. Treasuries were narrowly mixed on Monday. The yield on the two-year Treasury dropped to 0.74% from 0.76% on Friday, while the 10-year Treasury yield was unchanged from 1.78% and the 30-year Treasury bond yield was flat at 2.61%.
The 10-year muni to Treasury ratio was calculated on Monday at 95.7% compared with 95.0% on Friday, while the 30-year muni to Treasury ratio stood at 102.8% versus 102.3%, according to MMD.
The Primary Market
This week's $7.66 billion new issue calendar consists of $6.58 billion of negotiated deals and $1.08 billion of competitive sales.
On Monday, Jefferies priced UConn's $340.62 million of general obligation bonds for retail investors. The offering will have a second day of retail orders on Tuesday ahead of the institutional pricing on Wednesday.
The $259.43 million of Series 2016A GOs were priced to yield from 1.09% with a 4% and 5% coupons in a split 2019 maturity to 3.22% with a 4% coupon in 2036. No retail orders were taken in the 2028-2032 or 2034-2035 maturities. The 2017 and 2018 maturities were offered as sealed bids.
The $81.19 million of Series 2016A refunding GOs were priced as 5s to yield from 1.09% in 2019 to 2.33% in 2027. The 2017 and 2018 maturities were offered as sealed bids.
The issue is rated Aa3 Moody's Investors Service, AA by Standard & Poor's and AA-minus by Fitch Ratings.
On Tuesday, the city and county of San Francisco, Calif.'s will competitively sell of $179.42 million of Series 2016C, D and E general obligation various purpose bonds. The deal is rated Aa1 by Moody's and AA-plus by S&P and Fitch.
In the negotiated sector on Tuesday, Stifel is expected to price the San Diego Unified School District, Calif.'s $150.72 million of Series 2016 SR-1 GO refunding bonds. The deal is rated Aa2 by Moody's and triple-A by Fitch.
Citigroup is set to price Lubbock, Texas' $124 million of GO refunding and tax and waterworks system surplus revenue certificates on Tuesday. The issue is rated Aa2 by Moody's and AA-plus by S&P and Fitch.
Raymond James & Associates is set to price on Tuesday the Burleson Independent School District, Texas' $121.42 million of unlimited tax refunding bonds backed by the Permanent School Fund guarantee program. The bonds are rated triple-A by Moody's and S&P.
Citi is set to price the Tarrant County, Texas, Cultural Education Facilities Corp.'s $372 million of tax-exempt hospital revenue bonds for Baylor Scott & White Health for retail investors on Tuesday. The deal is part of a $912 million issue which also consists of $540 million of taxable corporate CUSIP bonds. The issue is slated to be priced for institutions on Wednesday. The bonds are rated Aa3 by Moody's and AA-minus by S&P.
Previous Week's Actively Traded Issues
Revenue bonds comprised 52.56% of new issuance in the week ended April 1, up from 52.35% in the previous week, according to Markit. General obligation bonds comprised 40.84% of total issuance, up from 39.50%, while taxable bonds made up 6.55%, down from 8.15%.
Some of the most actively traded issues by type in the week were in Kansas, California and Tennessee. In the GO bond sector, the Johnson and Miami County USD 230, Kan., 4s of 2023 traded 32 times. In the revenue bond sector, the California 4s of 2045 traded 116 times. And in the taxable bond sector, the Nashville and Davidson Health and Educational Facilities Board 4.053s of 2026 traded 26 times, Markit said.
BAML: Good First Quarter for Munis
Municipal bonds put in a good performance in the first quarter of the year, but not as good as those of Treasury and corporate bonds, according to a new report from Bank of America Merrill Lynch Global Research.
BAML said its Muni Master Index has returned 1.639% for the year-to-date, underperforming both its Treasury Master Index and U.S. Corporate IG Master Index, which had total returns of 3.281% and 3.923%, respectively.
The best performance in munis so far this year has been in the 22-year and longer maturities and in the triple-B rated sector, BAML said.
"Historically, March until early May is a technically weak period in munis, but the very strong fund flows into the market may largely offset that historical trend," the report said. "For first quarter 2016, industrial development revenue bonds had the best return at 2.202%, followed by toll and turnpike, and utilities, which returned 1.996% and 1.936%, respectively. Multi-family housing was the worst performer at 1.211%."
