Municipal bonds finished unchanged to stronger on Tuesday, according to traders, as yields on some top-quality maturities fell by as much as four basis points.
The yield on the 10-year benchmark muni general obligation fell two basis points to 1.85% from 1.87% on Monday, while the 30-year muni yield was unchanged from 2.77%, according to the final read of Municipal Market Data's triple-A scale. Maturities on the shorter and intermediate range of the scale were off by as much as four basis points.
U.S. Treasuries were narrowly mixed on Tuesday. The yield on the two-year Treasury fell to 1.02% from 1.03% on Monday, while the 10-year Treasury yield rose to 2.24% from 2.23% and the 30-year Treasury bond yield increased to 3.00% from 2.98%.
The 10-year muni to Treasury ratio was calculated on Tuesday at 82.4% compared with 83.5% on Monday, while the 30-year muni to Treasury ratio stood at 92.1% versus 92.8%, according to MMD.
Primary Market
William Blair & Co. priced the Allen Independent School District, Texas' $146.89 million of Series 2016 unlimited tax school building bonds on Tuesday.
The issue was priced to yield from 1.66% with a 3% coupon in 2023 to 2.89% with a 5% coupon in 2041. A 2017 maturity was offered as a sealed bid.
The bonds are backed by the Permanent School Fund guarantee program and are rated triple-A by Moody's Investors Service, Standard & Poor's and Fitch Ratings.
The Board of Regents of the University of Texas system is coming to market this week with two negotiated deals totaling $450 million.
Bank of America Merrill Lynch on Tuesday priced the Board's $200 million of Series 2016B revenue financing system green bonds for retail investors. The issue was structured with step coupons that increase over the life of the deal; it was priced for retail at par to yield 2.50% in 2036 and 2046.
Proceeds will be used to finance campus improvements for members of the system and to refund some of the Board's outstanding Series A commercial paper notes.
BAML is also expected to price the Board's $250 million of Series 2016A taxable revenue financing system bonds on Thursday.
Both series are rated triple-A by Moody's, S&P and Fitch.
Since 2006, the University of Texas system has issued about $9 billion of debt. The most issuance occurred in 2006 and 2010 when the Board offered $1.04 billion and $1.88 billion of bonds, respectively. The system didn't come to market in 2011 or in 2013.
In the competitive arena on Wednesday, the Massachusetts School Building Authority will sell $150 million of Series 2016A senior dedicated sales tax bonds. The deal is rated Aa2 by Moody's and AA-plus by S&P and Fitch.
On the short-term slate, Colorado will sell by competitive bid $339 million of Series 2015B education loan program tax and revenue anticipation notes. The TRANS, which are selling on Wednesday, are due June 29.
Also on Wednesday, Wells Fargo Securities is expected to price the New Jersey Healthcare Facilities Authority's $200 million of bonds for the Princeton Healthcare System. The issue is rated Baa2 by Moody's and triple-B by Fitch.
High Yield Munis on the Move
"High-yield munis appear to have momentum entering the seasonally strong month of January," John V. Miller, Co-Head of Fixed Income at Nuveen Asset Management, wrote in a Tuesday market comment. "Investors poured $300 million into high-yield funds last week, the largest [inflow] in several months, for a year-end total of $2.9 billion."
He said that the high-yield sector showed solid performance last year, with a qualification.
"Excluding Puerto Rico, high-yield municipal bonds produced an average total return of 7.53%, outperforming U.S. equities, U.S. Treasuries and high-yield corporate bonds in 2015. The yield ratio of high-yield municipal to high-yield corporate bonds has stabilized," he wrote.
