Top-quality municipal bonds were unchanged on Wednesday, traders said, as the first of the week's new supply started to come to market.
One deal the market won't be seeing on Thursday is what would have been the biggest negotiated sale of the week – the Texas Transportation Commission's $615.26 million of Series 2016A fixed-rate state highway fund first tier revenue bonds and $90 million of Series 2016B state highway fund first tier revenue refunding put bonds.
The deal is being postponed until early October, Morgan Stanley, the underwriter on one of the deals confirmed.
Primary Market
In the negotiated sector on Wednesday, Wells Fargo Securities priced Austin, Texas' $164.96 million of Series 2016 public improvement and refunding bonds, Series 2016 certificates of obligation and Series 2016 public property finance contractual obligations.
The $98.39 million of Series 2016 public improvement and refunding bonds were priced to yield from 0.69% with a 2% coupon in 2017 to 2.24% with a 5% coupon in 2036.
The $44.02 million of Series 2016 certificates of obligation were priced to yield from 0.80% in 2017 with a 2% coupon to 2.24% with a 5% coupon in 2036.
The $22.56 million of Series 2016 public property finance contractual obligations were priced to yield from 0.78% and 0.70% with 2% coupons in a split 2017 maturity to 1.33% with a 5% coupon and 1.38% with a 4% coupon in a split 2023 maturity.
The deal is rated triple-A by Moody's Investors Service, S&P Global Ratings and Fitch Ratings and carries stable outlooks from all three agencies.
Since 2006, Austin has sold about $6.95 billion of debt, with the largest issuance occurring in 2015 when it sold about $1 billion of bonds. In the same period, the lowest amount it has issued in a year was in 2007, when it came to market with $287 million.
In the competitive arena, Washington state sold about $225 million of motor vehicle future tax general obligation bonds in two separate offerings.
Citigroup won the $134.2 million of Series 2017B GOs with a true interest cost of 2.9969%. The issue is dated Sept. 20, due Aug. 1 with a first coupon of Feb. 1, 2017. The bonds were priced as 5s to yield from 0.64% in 2017 to 2.33% in 2041.
Citi also won the $90.37 million of Series 2017C GO SR 520 Corridor program toll revenue bonds with a TIC of 3.0055%.
The deals are rated Aa1 by Moody's and AA-plus by S&P and Fitch.
On Thursday, Bank of America Merrill Lynch is set to price the California's Health Facilities Financing Authority's $306 million of revenue bonds for Providence St. Joseph Health. The deal is rated Aa3 by Moody's and AA-minus by S&P and Fitch.
Jefferies is expected to price the New York Counties Tobacco Trust VI's $292.16 million of Series 2016 tobacco settlement pass-through bonds on Thursday.
The bonds are rated by S&P and range from A for the shorter maturities out to BBB on the longer-end.
In the competitive arena on Thursday, the Dormitory Authority of the State of New York is slated to sell five competitive issues totaling roughly $704.68 million. The DASNY deals are rated Aa1 by Moody's and triple-A by S&P.
Secondary Market
The yield on the 10-year benchmark muni general obligation was unchanged from 1.44% on Tuesday, while the yield on the 30-year was steady from 2.13%, according to the final read of Municipal Market Data's triple-A scale.
Treasuries were little changed on Wednesday. The yield on the two-year Treasury increased to 0.74% from 0.73% on Tuesday, the 10-year Treasury yield was flat at 1.54% and the yield on the 30-year Treasury bond was also unchanged at 2.23%.
The 10-year muni to Treasury ratio was calculated at 93.8% on Wednesday compared to 90.9% on Tuesday, while the 30-year muni to Treasury ratio stood at 95.4% versus 94.3%, according to MMD.
MSRB: Previous Session's Activity
The Municipal Securities Rulemaking Board reported 33,008 trades on Tuesday on volume of $6.78 billion.
BlackRock Income Roundtable
BlackRock hosted an income media roundtable at their New York offices on Wednesday, focusing in on how investors can get the yield they want, without unwanted or unnecessary risk, through the various asset classes.
At the beginning of the year, BlackRock's global chief investment officer Rick Rieder deemed 2016 "the year of carry." Rieder said on Wednesday that traditional ways of looking at and measuring the economy are flawed and distort reality, while investment valuations and price changes reflect reality.
"We believe the most important influence on the global and individual country's economy is demographics, not monetary policy, and that the world is shifting from a monetary policy – negative interest rates have not worked – to a fiscal policy orientation, which has the potential to work," said Rieder.
Municipals were touched on briefly by Sean Carney, director and head of municipal strategy at BlackRock, who said munis have been a bright spot so far this year.
"We have had 14 consecutive months of positive return and we see this continuing to bring in more flows," said Carney. "The demand has not only been robust but also broadly based across the board and will not end any time soon."
Rieder also said that U.S. rates can and are likely to rise to moderately higher levels and that investors should seek rate products globally that have greater economic headwinds.
"The Fed can and will likely let inflation run hotter as bad inflation is pretty well contained and wages can move higher from here – moving once this year and maybe one or twice next year," Rieder said.
