Top rated municipal bonds ended steady to weaker on Monday, according to traders, as more than $1 billion of taxable bonds from the Florida Hurricane Catastrophe Fund hit the market late in the day.
Primary Market
JPMorgan Securities priced the Florida State Board of Administration Finance Corp.'s $1.2 billion of Series 2016A taxable revenue bonds at par to yield 2.163% in 2019, about 125 basis points over the comparable Treasury security; and to yield 2.638% in 2021, about 140 basis points over the comparable Treasury security.
The bonds are rated Aa3 by Moody's Investors Service and AA by Standard & Poor's and Fitch Ratings.
The offering was the first to be issued under the State Board of Administration Finance Corp. name, the entity that replaced the Florida Hurricane Catastrophe Fund Finance Corp.
The state-run, nonprofit Cat Fund will use the bond proceeds as liquidity to make timely payments on insurance claims from damages caused by hurricanes. Florida lawmakers created the fund to stabilize the state's property insurance market after the devastating Hurricane Andrew in 1992, which forced some private insurers out of business and led others to leave the state because of the risk.
The Cat Fund acts like a reinsurer, providing coverage at below-market rates to private companies and the state-run Citizens Property Insurance Corp. Participation in the fund is mandatory and today 157 companies offering property insurance in Florida participate in the fund.
In 2015, the fund collected $10.2 billion in premiums representing $2.1 trillion of property insured by 6.5 million customers.
Since its creation, the fund has paid out over $9.7 billion in reimbursements to insurers. Most of the claims were the result of the eight major hurricanes that hit the state in 2004 and 2005. Florida has been hurricane-free for the past 10 years, leaving the fund in its best financial position ever.
On Monday, Jefferies held day two of its retail order period on New York City's $800.02 million of Fiscal 2016 Series C and D general obligation bonds ahead of the institutional pricing Tuesday.
The $750 million of Series C bonds were repriced on Monday for retail to yield from 0.80% with 3% and 5% coupons in a split 2019 maturity to 2.16% with a 5% coupon in 2027 and from 2.63% with a 5% coupon in 2033 to 3% with a 4% coupon in 2035. The 2017 and 2018 maturities were offered as sealed bids and no retail orders were taken in the 2028-2032 maturities. The $50.02 million of Series D bonds were repriced for retail to yield from 0.80% with a 3% coupon in 2019 to approximately 3.138% with a 3% coupon in 2035; the 2016-2018 maturities were offered as sealed bids.
According to the office of the New York City Comptroller's office, the sale is 100% refunding; over half of the bonds being refunded are currently callable.
"Although the market has been volatile, the current environment is very attractive for refunding. People will be sensitive to the market and its conditions, but the overall climate to sell bonds are good," the comptroller's office told The Bond Buyer.
This is the first GO sale from the city since July 2015 and as such, the city believes there is lots of pent up demand for these bonds.
"We expect good demand and it should go well, as we will be taking a lot of bonds out of the market," the comptroller's office said.
The issue is rated Aa2 by Moody's Investors Service and AA by Standard & Poor's and Fitch Ratings.
On Tuesday, Bank of America Merrill Lynch is set to price the University of North Carolina at Chapel Hill's $401 million of taxable Series 2016C general revenue refunding bonds. The deal is rated triple-A by Moody's, S&P and Fitch.
Baltimore County, Md., will competitively sell three issues totaling about $255 million on Tuesday. The deals will consist of $112 million of Series 2016 consolidated public improvement bonds, $88 million of 78th issue Metropolitan District bonds and $54.87 million of Series 2016 Metropolitan District refunding bonds. All three sales are rated triple-A by Moody's S&P and Fitch.
Ohio will competitively sell five issues totaling $306 million on Tuesday. The deals will consist of $112.54 million of Series 2016A common schools GO refunding bonds, $100 million of Series 2016A taxable Third Frontier Research and Development GOs, $63.88 million of Series 2016A infrastructure improvement GO refunding bonds, $17.28 million of Series 2016A conservation projects GO refunding bonds, and $12 million of Series N coal development GOs. All five issues are rated Aa1 by Moody's and AA-plus by S&P and Fitch.
Highland Park Independent School District, Texas, will competitively sell $203.05 million of Series 2016 unlimited tax school building bonds on Tuesday.
Secondary Market
The yield on the 10-year benchmark muni general obligation rose two basis points to 1.68% from 1.66% on Friday, while the 30-year muni yield was flat at 2.78%, according to the final read of Municipal Market Data's triple-A scale.
Treasuries were narrowly mixed on Monday. The yield on the two-year Treasury rose to 0.76% from 0.74% on Friday, while the 10-year Treasury yield was flat at 1.76% and the 30-year Treasury bond yield increased to 2.62% from 2.61%.
The 10-year muni to Treasury ratio was calculated on Monday at 95.3% compared to 95.0% on Friday, while the 30-year muni to Treasury ratio stood at 106.2% versus 105.7%, according to MMD.
MSRB Previous Session's Activity
The Municipal Securities Rulemaking Board reported 34,161 trades on Friday on volume of $8.21 billion.
Last Week's Most Active Sectors
Revenue bonds comprised 52.98% of new issuance in the week ended Feb. 19, up from 52.41% in the previous week,
General obligation bonds comprised 40.06% of total issuance, down from 40.27%, while taxable bonds made up 6.96%, down from 7.32%.
Some of the most actively traded issues by type in the week were in Texas, New York and California, according to Markit.
In the GO bond sector, the Dallas Independent School District, Texas, 3s of 2036 traded 30 times. In the revenue bond sector, the New York City Transitional Finance Authority 4s of 2041 traded 66 times. And in the taxable bond sector, the California 7.55s of 2039 traded 19 times.
