Top quality municipal bonds finished steady to weaker on Wednesday, traders said, as more new deals hit the market, led off by a $1.18 billion offering from Massachusetts.
Secondary Market
The yield on 10-year benchmark muni general obligation rose one basis point to 1.34% from 1.33% on Tuesday, while the 30-year muni yield was flat from 2.02%, according to the final read of Municipal Market Data's triple-A scale.
U.S. Treasuries were narrowly mixed on Wednesday. The yield on the two-year Treasury rose to 0.62% from 0.61% on Tuesday, while the 10-year Treasury yield gained to 1.47% from 1.46% and the yield on the 30-year Treasury bond was flat from 2.28%.
The 10-year muni to Treasury ratio was calculated at 90.4% on Wednesday, compared with 91.1% on Tuesday, while the 30-year muni to Treasury ratio stood at 88.1% versus 88.8%, according to MMD.
MSRB: Previous Session's Activity
The Municipal Securities Rulemaking Board reported 36,635 trades on Tuesday on volume of $10.21 billion.
Puerto Rico Bonds Trade Higher
In Washington, the U.S. Senate took a first step on Wednesday toward passing the House's Puerto Rico rescue bill, clearing the way for general debate.
Prices of Puerto Rico bonds turned higher on the news.
In late trading the benchmark Puerto Rico Commonwealth Series 2014A general obligation 8% bonds of 2035 traded at a high price of 67.06 cents on the dollar, a low yield of 12.603%, in nine trades totaling $17.83 million. On Tuesday, the GO 8s of 2035 traded at a high price of 65.875, or low yield of 12.785%, in 16 trades totaling $29.66 million.
In other trade, the Puerto Rico Sales Tax Financing Corp.'s 2009 First Subseries A 5.75% sales tax revenue bonds of 2037 traded at a high price of 49.20 cents on the dollar, a low yield of 12.737%, in 15 trades totaling $4.5 million. On Tuesday, the revenue 5 3/4s of 2037 traded at a high price of 47.415, or low yield of 13.184%, in four trades totaling $400,000.
The Puerto Rico Aqueduct and Sewer Authority Series 2012A senior lien revenue 5.25% bonds of 2042 traded at a high price of 67.50 cents on the dollar, a low yield of 8.325%, in 16 trades totaling $2.75 million. On Tuesday, the revenue 5 1/4s of 2042 traded at a high price of 66.599, or low yield of 8.441%, in nine trades totaling $66,000.
The Commonwealth Highway and Transportation Authority's 1998 Series A National IBC 4.75% transportation revenue bonds of 2038 traded at a high price of 97.81 cents on the dollar, a low yield of 4.914%, in 13 trades totaling $420,000. On Tuesday, the revenue 4 3/4s of 2038 traded at a high price of 94.25, or low yield of 5.191%, in four trades totaling $190,000.
In equities, the stock of Assured Guaranty Ltd. was trading up about 3.9% while the stock of MBIA Inc. was also around 3.9% higher.
Primary Market
The commonwealth of Massachusetts came to market with three separate negotiated deals, totaling over $1 billion.
On Wednesday, Bank of America Merrill Lynch priced and repriced the state's $728.14 million of Series 2016B general obligation refunding bonds for institutions following a one-day retail order period. The deal was upsized from $676.79 million on Wednesday morning and $521.91 million on Tuesday.
The bonds were repriced for institutions to yield from 0.54% with a 2% coupon in 2017 to 2.68% with a 3% coupon and 2.18% with a 5% coupon in a split 2038 maturity. On Tuesday, the deal was priced for retail investors to yield from 1.08% with a 5% coupon in 2022 to 2.66% with a 3% coupon in 2038.
BAML also priced the state's $250 million of GO consolidated loan of 2016 Series F taxable GO green bonds. The taxables were priced at par to yield 3.277% in 2046.
Barclays Capital priced Massachusetts' $200 million of GO consolidated loan of 2014 Series D multi-modal bonds and Subseries D-1 bonds as a remarketing. The bonds were priced at par to yield 1.05% in 2043 with a mandatory tender in 2020.
All the issues are rated Aa1 by Moody's Investors Service and AA-plus by S&P Global Ratings and Fitch Ratings.
Traders said the deal met with good reception, allowing the issuer to cut yields on the sale.
"What can I say," said one New York trader, "the deal got done, and it did well."
Barclays also priced the South Carolina Public Service Authority's $823.85 million of Series 2016 revenue obligations.
The $501.2 million of Series B tax-exempts were priced as 5s to yield from 2.20% in 2031 to 2.46% in 2037, 2.52% in 2041, and 2.57% in 2046. A 2051 maturity was priced as a step coupon bond at par to yield 2.25%, a 2056 maturity was priced as 5s to yield 2.87% and a 2056 maturity was prices as 4s to yield 3.12%.
The $322.65 million of Series 2016D taxables were priced to yield about 115 basis points over the comparable Treasury security in 2023. The deal is rated A1 by Moody's, AA-minus by S&P and A-plus by Fitch.
Since 2006, Santee Cooper has issued about $10.7 billion of debt, with the largest issuance occurring in 2013 when it sold $1.89 billion of securities. It has issued over $1 billion every year since 2013. The lowest year of issuance was in 2007, when it sold $440.5 million.
JPMorgan Securities priced the New Jersey Educational Facilities Authority's $203.12 million of Series 2016A revenue and refunding bonds for Stockton University.
The issue was priced to yield from 1.34% with a 4% coupon in 2018 to 3.08% with a 3% coupon in 2037; a 2041 maturity was priced as 5s to yield 2.92%.
The deal is rated Baa1 by Moody's and A by Fitch except for the 2020 and 2034-2037 maturities which are insured by Assured Guaranty Municipal and rated A2 by Moody's and AA by S&P.
JPMorgan also priced Utah County, Utah's $185 million of Series 2016B hospital revenue bonds for IHC Health Services.
The issue was priced to yield from 0.60% with a 4% coupon in 2017 to 1.57% with a 4% coupon in 2026; a 2046 maturity was priced as 5s to yield 2.40% and a 2047 split maturity was priced as 4s to yield 2.77% and as 3s to yield 3.15%. The deal is rated Aa1 by Moody's and AA-plus by S&P.
RBC Capital markets priced the Cleburne Independent School District, Johnson County, Texas' $108.98 million of Series 2016 unlimited tax school building bonds.
The issue was priced to yield from 0.72% with a 2% coupon in 2018 to 2.20% with a 5% coupon in 2036; a split 2041 maturity was priced as 5s to yield 2.32% and as 4s to yield 2.55%. The deal is backed by the Permanent School Fund guarantee program, and rated triple-A by Moody's.
JPMorgan received the official award on the state of Texas' $149.54 million of GOs.
The $58.56 million of Series 2016B Subseries 2016B-1 water financial assistance and refunding bonds were priced to yield from 0.57% with a 4% coupon in 2017 to 2.35% with a 4% coupon in 2036; a 2041 maturity was priced as 4s to yield 2.45% and a 2045 maturity was priced as 4s to yield 2.49%. The $30.36 million of Series 2016B Subseries 2016B-2 water financial assistance and refunding variable-rate bonds were priced as 2s to yield 0.95% in 2019. The $28.82 million of Series 2016C Subseries 2016C-1 water financial assistance and refunding bonds, economically distressed areas program, were priced to yield from 0.57% with a 4% coupon in 2017 to 1.41% with a 5% coupon in 2025. The $11.55 million of Series 2016D water financial assistance and refunding bonds, state participation program, were priced to yield from 1.22% with a 5% coupon in 2023 to 1.74% with a 5% coupon in 2035. The $20.26 million of Series 2016B Subseries 2016B-3 taxable water financial assistance and refunding bonds were priced at par to yield from 0.718% in 2017 to 2.645% in 2027.
The deal is rated triple-A by Moody's, S&P and Fitch.
