Top-quality municipal bonds finished weaker on Wednesday, traders said, as more supply hit the market, topped by issuers in California.
Secondary Market
The 10-year benchmark muni general obligation yield rose two basis points to 2.34% from 2.32% on Tuesday, while the yield on the 30-year GO increased four basis points to 3.09% from 3.05%, according to the final read of Municipal Market Data's triple-A scale.
U.S. Treasuries were also weaker on Wednesday as equity indexes raced to record highs. The Dow Jones Industrial Average passed the 20,000 mark in late trading
The yield on the two-year Treasury rose to 1.24% from 1.19% on Tuesday, while the 10-year Treasury yield gained to 2.52% from 2.47%, and the yield on the 30-year Treasury bond increased to 3.10% from 3.05%.
The 10-year muni to Treasury ratio was calculated at 92.9% on Wednesday compared to 94.0% on Tuesday, while the 30-year muni to Treasury ratio stood at 99.5%, versus 99.8%, according to MMD.
Primary Market
On Wednesday, the Los Angeles County Metropolitan Transportation Authority, Calif., competitively sold $455.71 million of Series 2017A Proposition C sales tax revenue bonds.
Wells Fargo Securities won the bonds with a true interest cost of 3.52%. The issue was priced as 5s to yield from 0.94% in 2018 to 3.15% in 2039 and 3.18% in 2042.
The deal is rated Aa2 by Moody's Investors Service and AA-plus by S&P Global Ratings.
Since 2008, the L.A. MTA authority has issued about $5.05 billion of debt, with the largest issuance occurring in 2009 when it sold roughly $1.1 billion of debt. The authority saw a low year of issuance in 2015, when it sold $91.3 million.
In the negotiated sector on Wednesday, Bank of America Merrill Lynch priced the San Francisco Bay Area Toll Authority, Calif.'s $300 million of Series 2017 F-1 revenue bonds and Series 2017 S-7 subordinate bonds.
The issue was priced as 4s to yield 4.05% and as 5s to yield 3.70% in a 2056 split maturity.
The deal is rated Aa3 by Moody's and AA by S&P and Fitch Ratings.
RBC Capital Markets priced the Spring Independent School District, Texas' $198.72 million of Series 2017 unlimited tax school building bonds.
The issue was priced to yield from 0.80% with a 3% coupon in 2017 to 3.26% with a 5% coupon in 2038; a 2042 maturity was priced as 5s to yield 3.33%.
The deal, which is backed by the Permanent School Fund, is rated triple-A by Moody's and S&P.
BAML priced the North Carolina Turnpike Authority's $137.61 million of Series 2016A toll revenue bonds and Series 2016C capital appreciation bonds for the Monroe Expressway.
The $120 million of Series 2016A bonds were priced as 5s to yield 2.81% in 2023, as 4 1/4s to yield 4.30% in 2041, as 5s to yield 4.06% in 2042, as 5s to yield 4.11% in 2047, as 5s to yield 4.21% in 2051 and as 5s to yield 4.31% in 2054. The $17.56 million of Series 2016C CABs were priced to yield from 3.86% in 2026 to 4.97% in 2041.
The deal is rated Baa3 by Moody's and BBB-minus by S&P.
In the taxable sector, Jefferies priced the Texas Public Finance Authority's $375 million of Series 2017 taxable GO and refunding bonds.
The taxables were priced to yield from about 10 basis points above the comparable Treasury security in 2018 to about 85 basis points above the comparable Treasury security in 2036.
The deal is rated triple-A by Moody's and S&P.
Barclays Capital priced the Medical Center Hospital Authority, Ga.'s $104.42 million of taxable revenue anticipation certificates for the Columbus Regional Healthcare System Inc. The issue was priced at par to yield 4.875% in 2022.
The deal is rated BBB-minus by S&P and BB-plus by Fitch.
NYC MWFA Sets $330M Sale
The New York City Municipal Water Finance Authority said it will sell $330 million of tax-exempt fixed-rate bonds on Tuesday, Jan. 31, after a one-day retail order period on Monday, Jan. 30.
The bonds will be sold through the authority's underwriting syndicate, led by book-running senior manager Barclays Capital, the MWFA announced on Wednesday. Raymond James and Siebert Cisneros Shank will serve as co-senior managers on the deal.
Siebert Sees Supply, Technicals Improving
"The strong tone in the market that was present throughout January came to an abrupt and somewhat enigmatic end last week," according to a Siebert Cisneros Shank market comment on Tuesday. "Rich percentages of municipal yields versus U.S. Treasuries as well as numerous customer bid lists were the largest contributors of this trade-off, but market participants were still unsure of the full reasoning for the selloff. Municipals underperformed their U.S. Treasury counterparts up and down the yield curve."
SCS saw some more positive signs.
"Supply this week [the week of Jan. 23] is very manageable and technical[s] will become more positive going forward due to bonds maturing and other redemptions," SCS wrote.
