Top-shelf municipal bonds were steady to slightly weaker at mid-session, traders said, as a second wave of new issuance swept over the market on Wednesday.
Secondary Market
The yield on the 10-year benchmark muni general obligation was unchanged from 1.45% on Tuesday, while the yield on the 30-year muni was as much as one basis point higher from 2.11%, according to a read of Municipal Market Data's triple-A scale.
U.S. Treasuries gave back the previous day's gains and turned weaker on Wednesday, analysts said, due to a story in the Wall Street Journal hinting that the Federal Reserve would move earlier, rather than later, this year to raise interest rates.
The yield on the two-year Treasury rose to 0.71% from 0.69% on Tuesday as the 10-year Treasury yield gained to 1.59% from 1.55% and the yield on the 30-year Treasury bond increased to 2.31% from 2.27%.
"The Fed was providing an early glimpse of the FOMC meeting scheduled for next week in the Wall Street Journal," MMD Senior Market Analyst Randy Smolik wrote in a market comment. "The article relayed how encouraged Fed officials were in recent economic releases as well as their assessment that Brexit may not have much impact on the U.S. economy. The Fed was likely to raise rates at least once this year and it could occur as early as September."
On Tuesday, the 10-year muni to Treasury ratio was calculated at 93.2% compared to 91.5% on Monday, while the 30-year muni to Treasury ratio stood at 92.8% versus 91.7%, according to MMD.
MSRB: Previous Session's Activity
The Municipal Securities Rulemaking Board reported 36,043 trades on Tuesday on volume of $9.44 billion.
Primary Market
Wells Fargo Securities priced the New York Metropolitan Transportation Authority's significantly upsized $838.31 million of Series 2016C transportation revenue and transportation revenue refunding bonds for institutions after holding a one-day retail order period. The deal added a refunding component for institutional investors.
The $525.12 million of Series 2016C-1 transportation revenue bonds were priced to yield from 0.85% with a 4% coupon in 2019 to 2.51% with a 5% coupon in 2039; a 2041 maturity was priced as 4s to yield 2.76%, a 2046 maturity was priced as 5s to yield 2.56% and a split 2056 maturity was priced as 5s to yield 2.79% and as 5 1/4s to yield 2.71%. The 2017 and 2018 maturities were offered as sealed bids.
The $313.19 million of Series 2016C-2 transportation revenue refunding bonds were priced to yield from 2.06% with a 5% coupon in 2028 to 2.40% with a 5% coupon and 2.63% with a 4% coupon in a split 2034 maturity; a split 2038 maturity was priced at par to yield 3% and as 4s to yield 2.74%.
On Tuesday, the $529.61 million transportation revenue bonds were priced for retail to yield from 0.86% with a 4% coupon in 2019 to 2.50% with a 5% coupon in 2039; a 2041 maturity was priced as 4s to yield 2.76%, a 2046 maturity was priced as 5s to yield 2.56% and a 2056 maturity was priced as 5s to yield 2.79%.
The deal is rated A1 by Moody's Investors Service, AA-minus by S&P Global Ratings, A by Fitch Ratings and AA-plus by Kroll Bond Rating Agency.
Morgan Stanley priced the State Building Authority of Michigan's $666.13 million of Series 2016 revenue and revenue refunding bonds.
The bonds were priced to yield from 0.76% and 0.80% with 5% coupons in split 2018 maturity to 2.55%, 2.80% and 2.642% with 5%, 4%, and 2.50% coupons in a triple-split 2036 maturity. A term bond in 2041 was priced as 5s to yield 2.61%, a term bond in 2046 was priced as 5s to yield 2.66% and a term bond in 2051 was priced as 5s to yield 2.76%.
The deal is rated Aa2 by Moody's, A-plus by S&P and AA-minus by Fitch.
Since 2006, the Michigan SBA has issued about $3.7 billion of debt, with the largest issuance occurring in 2015 when it sold $989 million of securities. This sale will mark the first time the Michigan SBA has issued in back-to-back years since 2008 and 2009.
Bank of America Merrill Lynch priced the Ohio Water Development Authority's $135 million of Series 2016 drinking water assistance fund revenue bonds.
The issue was priced to yield from 0.87% with a 4% coupon in 2020 to 2.20% with a 5% coupon in 2037. The deal is rated triple-A by Moody's, S&P and Fitch.
Goldman Sachs is expected to price New York City Trust for Cultural Resources' $227.19 million of Series 2016-One-E revenue bonds for the Museum of Modern Art. The MoMA bonds are rated Aa2 by Moody's and AA by S&P.
Morgan Stanley is set to price the Louisiana Citizens Property Insurance Corp.'s $166.47 million of Series 2016A assessment revenue refunding bonds.
Bond Buyer Visible Supply
The Bond Buyer's 30-day visible supply calendar decreased $1.50 billion to $11.95 billion on Wednesday. The total is comprised of $4.46 billion of competitive sales and $7.49 billion of negotiated deals.
