Top-rated municipal bonds finished mixed on Monday, according to traders, as deals from the New York City Transitional Finance Authority and the Westchester County, N.Y., Local Development Corp. came to market.
Traders were also watching the Federal Reserve, as it prepares to gather in Washington, D.C., for a two-day mid-week monetary policy meeting.
Secondary Market
The yield on the 10-year benchmark muni general obligation was steady from 1.89% on Friday, while the 30-year muni yield fell one basis point to 2.85% from 2.86%, according to the final read of Municipal Market Data's triple-A scale.
Treasuries were flat to stronger on Monday. The yield on the two-year Treasury was unchanged from 0.96% on Friday, while the 10-year Treasury yield fell to 1.96% from 1.98% and the 30-year Treasury bond yield decreased to 2.72% from 2.75%.
The 10-year muni to Treasury ratio was calculated on Monday at 96.4% compared to 95.7% on Friday, while the 30-year muni to Treasury ratio stood at 104.3% versus 104.1%, according to MMD.
The Prior Week's Most Actively Traded Issues
Revenue bonds comprised 52.64% of new issuance in the week ended March 11, up from 52.30% in the previous week, according to Markit. General obligation bonds comprised 39.57% of total issuance, down from 40.31%, while taxable bonds made up 7.79%, up from 7.39%, according to Markit.
Some of the most actively traded issues by type in the week were in California and Ohio. In the GO bond sector, the California 5s of 2045 traded 143 times. In the revenue bond sector, the Los Angeles County Public Works Financing Authority 4s of 2040 traded 80 times. And in the taxable bond sector, the Ohio State University 3.798s of 2046 traded 30 times, Markit said.
Primary Market
On Monday, Ramirez & Co. priced the NYC TFA's $750 million of Building Aid Revenue Bonds, Fiscal 2016 Series S-1, after a two-day retail order period last week.
Ramirez priced the issue for institutions to yield from 0.64% with a 3% coupon in 2017 maturity to 3.02% with a 5% coupon in 2037; a 2040 maturity was priced as 4s to yield 3.36%, a 2043 maturity was priced as 5s to yield 3.17% and a 2045 maturity was priced as 4s to yield 3.44%.
The demand was great during both the retail order period and the institutional pricing, according to the City Comptroller's office.
"The TFA received approximately $358 million of retail orders for the tax-exempt bonds during the two-day retail order period preceding [Monday's] sale," the TFA said in a release.
"Both days had strong demand, over $185 million on day one and over $169 million on day two," said a spokesperson for the Comptroller's office, who added that all of the proceeds will go toward school capital projects.
The stronger investor demand carried over into the institutional order period as well.
"We received over $750 million of orders for the $452 million of bonds offered for institutions," said the spokesperson. "Most maturities were oversubscribed. Most notably, the two large term bonds maturing in the 2040 and 2043 were two times oversubscribed, which resulted in a lowering of yield by one basis point in each maturity."
According to the Comptroller's office, the BARBs are the least-issued credit and the transaction benefited from its scarcity value and high credit rating.
The bonds are rated Aa2 by Moody's Investors Service and AA Standard & Poor's and Fitch Ratings.
Also Monday, Wells Fargo Securities priced the Westchester County LDC's $283.76 million of Series 2016 revenue bonds for the Westchester Medical Center Obligated group.
The issue was priced to yield from 0.45% with a 3% coupon in 2016 to 3.49% with a 5% coupon in 2034; a 2037 maturity was priced as 3 3/4s to yield 3.90% and a 2046 maturity was priced as 5s to yield 3.79%. The bonds are rated Baa2 by Moody's and BBB by S&P.
This week's calendar totals $7.27 billion, consisting of $5.78 billion of negotiated deals and $1.49 billion of competitive sales.
The largest deal of the week will be coming from the Nashville and Davidson County Health and Educational Facilities, Tenn. JPMorgan Securities is set to price $780 million of revenue bonds for the Vanderbilt University Medical Center in a transaction that consists of $530 million tax-exempts and $250 million of taxables. The target date for the sale is Thursday. The bonds are rated A3 by Moody's.
Ramirez is also set to price Connecticut's $550 million of general obligation bonds on Wednesday. The bonds are rated Aa2 by Moody's and AA by S&P, Fitch and Kroll Bond Rating Agency.
The competitive calendar is light this week, with only two issuers coming to market with sales of over $100 million.
The state of Hawaii will offer two separate sales totaling $525 million on Tuesday. The Aloha State will start off with $500 million of GOs and then follow it up with $25 million of taxable GOs. This will mark the first time in more than a quarter century that Hawaii will sell a competitive bond issue. Both sales are rated Aa2 by Moody's and AA by S&P and Fitch.
Howard County, Md., will be selling three separate sales totaling $172.25 million, also on Tuesday. The largest of the three deals is a $135.97 million offering of GO consolidated public improvement project refunding bonds. All three issues are rated triple-A by Moody's, S&P and Fitch.
Fed Unlikely to Move This Week
The Federal Open Market Committee, which starts its two-day meeting tomorrow, is likely to stand pat on interest rates. Given the European Central Bank's lowering of rates last week and the potential impact of that move on the already-rising dollar, an increase at this meeting is unlikely, though there is a chance Fed policy makers will have an opportunity to tighten credit again in June. Look for Federal Reserve chair Janet Yellen to leave that possibility open during her press conference after the meeting. The FOMC statement Wednesday will give a clearer view whether the Fed still expects three to four rate hikes this year.
