Top-quality municipal bonds finished steady to stronger on Wednesday, according to traders, as an Illinois issuer sold bonds one day after the city of Chicago came to market and one day ahead of the state's big competitive sale.
The yield on the 10-year benchmark muni general obligation was unchanged from 1.78% on Tuesday, while the 30-year muni yield fell one basis point to 2.72% from 2.73%, 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 declined to 0.90% from 0.91% on Tuesday, while the 10-year Treasury yield dropped to 2.05% from 2.10% and the 30-year Treasury bond yield decreased to 2.84% from 2.88%.
The 10-year muni to Treasury ratio was calculated on Wednesday at 84.5% compared with 84.8% on Tuesday, while the 30-year muni to Treasury ratio stood at 94.9% versus 94.8%, according to MMD.
Primary Market
The Illinois Regional Transportation Authority competitively sold $100 million of Series 2016A general obligation bonds on Wednesday.
JPMorgan won the issue with a true interest cost of 3.51%. The issue was priced to yield from 0.80% with a 4% coupon in 2017 to 3.55% with a 4% coupon in 2040; a 2046 term bond was priced as 4s to yield 3.65%. The bonds were rated Aa3 by Moody's Investors Service and AA by Standard & Poor's and Fitch Ratings.
The last time the RTA competitively sold comparable bonds was on Jan. 28, 2014, when Wells Fargo Securities won $99.30 million of Series 2014A GOs with a TIC of 4.38%.
The sale came one day after Chicago sold $500 million GO refunding and restructuring bonds. While spreads were narrower than in Chicago's most recent sales in the spring and summer, the city still paid a high rate to borrow due to its ongoing pension woes and credit deterioration.
The final pricing on the Chicago deal had a top yield of 4.875% in 2038. The 22-year rate represents a spread of 229 basis points to the triple-A rated Municipal Market Data benchmark and 139 basis points over the triple-B benchmark.
On Thursday, the state of Illinois will competitively sell $480 million of Series of 2016 GOs, its first bond issuance since 2014.
The bonds are rated Baa1 by Moody's Investors Service, A-minus by S&P and triple-B-plus by Fitch.
The last time the state competitively sold comparable bonds was on April 10, 2014, when Bank of America Merrill Lynch won $250 million GOs with a TIC of 4.08%.
Since 2006, Illinois has sold about $27 billion of bonds, with the most issuance occurring in 2010 and 1012 when it issued $8.68 billion and $5.11 billion, respectively. The state did not sell any bonds in 2015.
In other news, JPMorgan received the official award on the Illinois Housing Development Authority's $88.7 million of Series 2016A taxable homeowner mortgage revenue bonds. The issue was priced at par to yield from 1.108% in 2016 to 4.18% in 2029; a 2034 maturity was priced as 4s to yield 3.14%. The bonds were rated Aa3 by Moody's and AA by S&P.
Elsewhere, Seattle, Wash., competitively sold $123.18 million of Series 2016B municipal light and power refunding revenue bonds on Wednesday. Citigroup won the issue with a TIC of 2.07%. The deal was priced to yield from 0.45% with a 5% coupon in 2016 to 2.45% with a 4% coupon in 2029.
Seattle also competitively sold $32 million of Series 2016A taxable new clean renewable energy direct payment municipal light and power revenue bonds. Wells Fargo Securities won the bonds with a TIC of 4.05% and priced them as 4.05s to yield 4% in 2041.
Both issues were rated Aa2 by Moody's and AA by S&P.
In the negotiated sector, Bank of America Merrill Lynch received the official award on the Delaware Transportation Authority's $181.48 million of Series 2016 transportation system revenue bonds. The issue was priced to yield from 0.96% with a 3% coupon in 2019 to 2.55% and 2.51% with 2.50% and 3% coupons in a split 2029 maturity. The bonds were rated Aa2 by Moody's and AA-plus by S&P.
MSRB Previous Session's Activity
The Municipal Securities Rulemaking Board reported 37,873 trades on Tuesday on volume of $6.60 billion.
