Top shelf municipal bonds ended weaker on Monday, traders said, as the first of the week's new issues began to sell. Traders are looking at a short week, with the market closed on Friday ahead of the Easter holiday.
Primary Market
Most of this week's primary deals are jammed into Tuesday and Wednesday, with almost all coming in the negotiated sector. There is only one competitive sale over $100 million and that sold on Monday.
The Florida Department of Transportation competitively sold $113.35 million of Series 2016B turnpike revenue refunding bonds. Bank of America Merrill Lynch won the issue with a true interest cost of 1.9801%. The issue was priced to yield from 0.66% with a 5% coupon in 2017 to 2.56% with a 2.625% coupon in 2027.
Florida Bond Director Ben Watkins told The Bond Buyer he was very pleased with the results of the sale, which was upsized from $106.21 million.
"The deal went very well," he said. "There were five bids at 1.98%. The difference between the winning and cover bids was 1/1000 of 1%."
The "deal came nearly 10 basis points through our estimates and saved the state $17.2 million," he said, adding that there were no balances remaining. "That is how a deal is supposed to work."
The bonds are rated Aa2 by Moody's Investors Service and AA-minus by Fitch Ratings.
Since 2012, the DOT has sold about $3 billion of bonds, with the biggest issuance coming in 2012 when it offered $745 million of bonds and the least being in 2014 when $629 million came to market.
Morgan Stanley priced the Kentucky Turnpike Authority's $223.25 million of Series 2016A economic development road revenue refunding bonds for revitalization projects.
The issue was priced to as 4s yield 0.38% in 2016 and to yield from 1.20% with 3% and 4% coupons in a split 2019 maturity to 3% at par and 2.70% with a 5% coupon in a split 2029 maturity. The bonds are rated Aa2 by Moody's, AA-minus by Standard & Poor's and A-plus by Fitch.
Citigroup priced DeKalb County, Ga.'s $142.25 million of Series 2016 special transportation, parks and greenspace and libraries tax district general obligation refunding bonds.
The issue was priced to yield from 0.98% with a 3% coupon in 2018 to 2.79% with a 4% coupon in 2030. The deal is rated Aa3 by Moody's and AA-minus by Fitch.
JPMorgan Securities priced the San Jacinto Community College District, Texas' $179.01 million of limited tax GO and GO refunding bonds.
The $131.95 million of Series 2016A GO building bonds were priced to yield from 0.85% with a 3% coupon in 2018 to 3% with a 5% coupon in 2036; a 2041 maturity was priced as 4s to yield 3.55% and a 2046 maturity was priced as 4s to yield 3.61%. The $47.07 million of Series 2016B GO refunding bonds were priced to yield from 1.26% with a 5% coupon in 2020 to 2.91% with a 4% coupon in 2030 and to yield from 2.91% with a 5% coupon in 2034 to 3% with a 5% coupon in 2036; a 2038 maturity was priced as 3 3/8s to yield 3.52%. The bonds are rated Aa2 by Moody's and AA by S&P.
The biggest deal of the week is coming on Tuesday from Houston, when Loop Capital Markets prices the city's $581.99 million of Series 2016A public improvement refunding bonds. The deal is rated Aa3 by Moody's and AA by S&P.
Also on Tuesday, Citi is expected to price the city and county of Denver's $353 million of tax revenue refunding bonds consisting of tax-exempt and taxables. The deal is rated Aa3 by Moody's and AA-minus by S&P.
RBC Capital Markets is set to price the Board of Regents of the Texas A&M University System's $325.75 million of Series 2016B taxable revenue financing bonds on Tuesday. The bonds are rated triple-A by Moody's and expected to be rated AA-plus by S&P.
In the short-term competitive arena on Tuesday, the New York Metropolitan Transportation Authority is selling $700 million of bond anticipation notes in two separate sales. The MTA will offer $500 million of Series 2016 Subseries 2016A-1 due Oct. 1, and $200 million of Series 2016 Subseries 2016A-2 due Feb. 1, 2017. The BANs are rated MIG1 by Moody's, SP1-plus by S&P and F1 by Fitch.
Secondary Trading
The yield on the 10-year benchmark muni general obligation rose one basis point to 1.84% from 1.83% on Friday, while the 30-year muni yield increased by one basis point to 2.80% from 2.79%, according to the final read of Municipal Market Data's triple-A scale.
U.S. Treasuries were lower on Monday. The yield on the two-year Treasury rose to 0.87% from 0.84% on Friday, while the 10-year Treasury yield gained to 1.92% from 1.87% and the 30-year Treasury bond yield increased to 2.72% from 2.67%.
The 10-year muni to Treasury ratio was calculated on Monday at 95.8% compared to 97.7% on Friday, while the 30-year muni to Treasury ratio stood at 102.6% versus 104.3%, according to MMD.
The Prior Week's Most Actively Traded Issues
Revenue bonds comprised 51.82% of new issuance in the week ended March 18, down from 52.64% in the previous week, according to Markit. General obligation bonds comprised 40.067% of total issuance, up from 39.57%, while taxable bonds made up 8.12%, up from 7.79%,
Some of the most actively traded issues by type were in California and New York, In the GO bond sector, the California 3s of 2033 traded 49 times. In the revenue bond sector, the New York City Transitional Finance Authority 4s of 2045 traded 132 times. And in the taxable bond sector, the California 7.55s of 2039 traded 23 times, Markit said.
RBC: Muni Bond Fund Inflows Stay Strong
Municipal bond funds are continuing to see strong inflows, according to Lipper, and have seen cash infusions for 24 straight weeks.
"We have yet to see the traditional spring fund flow weakness materialize," Chris Mauro, Head of Municipals Strategy at RBC Capital Markets, wrote in a market comment on Monday. "If this solid trend continues, the 2016 tax season would be the first since 2009 without outflows."
Since the recent streak of muni inflows began, weekly and monthly reporting funds have posted a cumulative $21.6 billion in net inflows, Mauro wrote.
