Municipal bonds closed weaker on Thursday, according to traders, as tax-exempts followed Treasuries lower.
The yield on the 10-year benchmark muni general obligation rose three basis points to 1.41% from 1.38% on Wednesday, while the yield on the 30-year muni increased four basis points to 2.05% from 2.01%, according to the final read of Municipal Market Data's triple-A scale.
U.S. Treasuries were narrowly mixed on Thursday amid signs that overseas central banks will add stimulus, which stemmed the flight to quality that followed the British vote to leave the European Union.
The yield on the two-year Treasury was unchanged from 0.67% on Wednesday as the 10-year Treasury yield gained to 1.53% from 1.47% and the yield on the 30-year Treasury bond increased to 2.25% from 2.18%.
The 10-year muni to Treasury ratio was calculated at 92.1% on Thursday compared to 94.1% on Wednesday, while the 30-year muni to Treasury ratio stood at 91.1% versus 92.4%, according to MMD.
Primary Market
In the competitive sector on Thursday, Wichita, Kan., sold two issues totaling about $129 million.
Bank of America Merrill Lynch won the $103.06 million of Series 2016B water and sewer utility refunding revenue bonds with a true interest cost of 2.36%. The issue was priced to yield from 0.65% with a 2% coupon in 2017 to 2.80% with a 3% coupon in 2034; a 2039 maturity was priced as 3s to yield 2.95%.
BAML also won the $26.09 million of Series 2016A water and sewer utility revenue bonds with a TIC of 2.39%. Both deals are rated AA-minus by S&P Global Ratings.
Estrada Hinojosa received the official award Thursday on the Board of Regents of the Texas A&M University System's $139.35 million of Series 2016E revenue financing system bonds.
The issue was priced to yield 0.64% with a 2% coupon in 2017 and from 0.84% with a 5% coupon in 2020 to 2.31% with a 4% coupon in 2035. The deal is rated triple-A by Moody's Investors Service, S&P and Fitch Ratings.
Since 2006, the Board of Regents of the Texas A&M University System has issued about $4.4 billion of debt, with the largest issuance occurring in 2009 when it sold $924 million of securities.
Late Wednesday, the New York City Transitional Finance Authority said it accepted $175 million of retail orders on its $800 million of future tax secured fixed-rate subordinate bonds tax-exempt new money bonds during a two-day retail order period. The issue was priced by Siebert Brandford Shank & Co.
The TFA said that for the institutional pricing "strong investor demand made it possible to reduce yields by up to five basis points in 11 maturities. Final stated yields on the tax-exempt bonds varied by coupon and maturity, ranging from 0.60% in 2018 to 2.24% in 2040 for a 5.0% premium coupon bond and 2.51% in 2042 for a 4.0% coupon bond."
The TFA also competitively sold $250 million of taxable fixed-rate bonds. RBC Capital Markets won the $186.9 million of Fiscal 2017 Series A Subseries A-2 future tax secured bonds with a true interest cost of 1.98%, while Bank of America Merrill Lynch won the $63.1 million of Fiscal 2017 Series A Subseries A-3 future tax secured bonds with a TIC of 2.58%.
The bonds are rated Aa1 by Moody's and triple-A by S&P and Fitch; all three agencies have a stable outlook on the credit.
June Requests for New Muni CUSIPs Up 1%
Demand for new municipal CUSIP identifiers rose 1% in June, the fifth straight monthly increase, CUSIP Global Services said in a report released on Thursday.
A total of 1,754 new municipal bond identifier requests were made in June, up from 1,740 in May. On a year-over-year basis, June municipal bond identifier requests were up by 1.3%.
Long-term muni note CUSIP orders rose to 107 in June, compared to 36 requests in May. Short-term note muni CUSIP volume rose to 176 in June from 62 in May.
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.
"While the month-to-month growth rate of new CUSIP requests in the corporate debt and municipal bond market has slowed from the break-neck pace we were seeing earlier in the year, we're still seeing indications of very steady new issuance volume for the coming months," Gerard Faulkner, Director of Operations for CUSIP Global Services, said in a press release. "As we turn the corner to the second half of the year, we expect the CUSIP indicator to be a telling signal for the market appetite of major debt and equity issuers."
Regionally, municipal bond issuers in Texas demanded the highest volume of new CUSIP identifiers in the first half of 2016, accounting for 1,013 identifier requests. New York came in second with 774 CUSIP requests and California was third with 656 CUSIP requests.
"Given all of the uncertainty in the global economy right now, it's actually quite amazing that CUSIP request volume has stayed so strong," Richard Peterson, senior director, S&P Global Market Intelligence, said in the release. "Clearly, issuers across several asset classes still see an attractive environment for raising new capital and that sentiment is continuing to show up in our CUSIP request data."
Tax-Exempt Money Market Fund Outflows
Tax-exempt money market funds experienced outflows of $4.29 billion, bringing total net assets to $189.67 billion in the week ended July 11, according to The Money Fund Report, a service of iMoneyNet.com. This followed an outflow of $945.1 million to $193.96 billion in the previous week.
The average, seven-day simple yield for the 274 weekly reporting tax-exempt funds fell to 0.06% from 0.07% the previous week.
The total net assets of the 885 weekly reporting taxable money funds increased $22.22 billion to $2.510 trillion in the week ended July 12, after an outflow of $24.83 billion to $2.488 trillion the prior before.
The average, seven-day simple yield for the taxable money funds declined to 0.11% from 0.12% the week before.
Overall, the combined total net assets of the 1,159 weekly reporting money funds increased $17.92 billion to $2.700 trillion in the period ended July 12, which followed an outflow of $25.77 billion to $2.682 trillion.
