Top quality municipal bonds were mixed at mid-session, according to traders, as more supply hit the market, topped by deals from California State University and Anne Arundel County, Md.
Barclays Capital Markets priced the Trustees of the California State University’s $1.39 billion of Series 2016 A & B revenue bonds for institutional investors after holding a one-day retail order period.
The $1.14 billion of Series 2016A bonds were priced to yield from 0.60% with a 2% coupon in 2017 to 3.16% with a 4% coupon in a 2038 maturity. A 2041 maturity was priced as 5s to yield 2.87 and a split 2045 maturity was priced as 4s to yield 3.27% and as 5s to yield 2.92%. The $50 million of Series 2016B-1 were priced as 3s to yield 1.15% in 2047; the maturity has a mandatory tender in 2019. The $100 million of Series 2016B-2 was priced as 4s to yield 1.50% in 2049; the maturity has a mandatory tender in 2021. The $100 million of Series 2016B-3 were priced as 4s to yield 1.83% in 2051; the maturity has a mandatory tender in 2023.
The issue is rated Aa2 by Moody's Investors Service and AA-minus by Standard & Poor’s.
Since 2006, CSU has sold about $6 billion of bonds, with the largest issuance occurring last year when it issued $1.1 billion of bonds. The trustees sold a low amount of $309 million in 2013. CSU is composed of 23 campuses and eight off campus centers and is the largest four-year public university system in the United States.
In the competitive arena on Wednesday, Anne Arundel County, Md., sold two issues totaling $285.13 million.
Bank of America Merrill Lynch won the $145.35 million of general obligation refunding Series 2016 consolidated general improvements and consolidated water and sewer bonds with a true interest cost of 1.80%. The $70.85 million of general improvement bonds were priced to yield from 0.54% with a 5% coupon in 2016 to 2.20% with a 3% coupon in 2027. The $74.51 million of water and sewer bonds were priced to yield from 0.54% with a 5% coupon in 2016 to 3.10% with a 3% coupon in 2035.
Bank of America Merrill Lynch won the $139.78 million of Series 2016 GO consolidated general improvements and consolidated water and sewer bonds with a TIC of 3.20%. The $95.31 million of general improvement bonds were priced as 5s to yield from 0.50% in 2016 to 2.75% in in 2042 and 2.78% in 2045. The $44.47 million of water and sewer bonds were priced to yield from 0.50% with a 3% coupon in 2016 to 2.75% with a 5% coupon in 2042; a 2045 maturity was priced as 5s to yield 2.78%
Both issues are rated Aa1 by Moody’s and triple-A by Standard & Poor’s.
Morgan Stanley priced the Pennsylvania Turnpike Commission’s $204.65 million of Series 2016A subordinated revenue bonds to yield from 1.46% with a 3% coupon in 2020 to 3.35% with a 5% coupon in 2036. A term bond in 2041 was priced to yield 3.52% with a 5% coupon and a term bond in 2046 was priced to yield 3.58% with a 5% coupon. The deal is rated A3 by Moody’s and A-minus by Fitch Ratings.
BAML priced for retail the state of Hawaii's $306.75 million of GO refunding bonds. The $5.3 million of tax-exempt Series FD bonds were offered as a sealed bid maturing in 2016. The $182.005 million of tax-exempt Series FE bonds were priced to yield from 1.05% with a 5% coupon in 2019 to 2.23% with a 4% coupon in a split 2028 maturity, with the other half not available to retail investors.
The $119.45 million of taxable Series FF bonds were priced for retail to yield from about 35 basis points over the comparable Treasury security in 2020 to approximately 125 basis points over the comparable Treasury security in 2028.
The bonds are rated Aa2 by Moody’s and AA by S&P and Fitch.
Bond Buyer Visible Supply
The Bond Buyer's 30-day visible supply calendar fell $1.66 billion to $8.25 billion on Wednesday. The total is comprised of $2.15 billion of competitive sales and $6.09 billion of negotiated deals.
Secondary Trading
The yield on the 10-year benchmark muni general obligation was as much as two basis points weaker from 1.78% on Tuesday, while the 30-year muni yield was steady from 2.73%, according to a read of Municipal Market Data's triple-A scale.
U.S. Treasuries were narrowly mixed on Wednesday. The yield on the two-year Treasury dipped to 0.78% from 0.79% on Tuesday, while the 10-year Treasury yield increased to 1.85% from 1.82% and the 30-year Treasury bond yield rose to 2.67% from 2.61%.
The 10-year muni to Treasury ratio was calculated on Tuesday at 98.2% compared with 97.4% on Monday, while the 30-year muni to Treasury ratio stood at 104.7% versus 104.4%, according to MMD.
MSRB Previous Session's Activity
The Municipal Securities Rulemaking Board reported 38,996 trades on Tuesday on volume of $10.79 billion.
Yellen: External Threats to U.S. Economy Pose Real Risks
Risks to the U.S. economy from a global economic slowdown are significant and have risen since last year, Federal Reserve Board Chair Janet L. Yellen told the Economic Club of New York on Tuesday.
Answering a question from former Fed Vice Chair Alan Blinder, Yellen said that while the U.S. economy has proven remarkably resilient, the pace of global growth and the prospects for oil prices will have direct and indirect effects on the economy. This may be seen through slower export growth, with financial market concerns that tends to mean a stronger dollar and lower equity prices. These heightened risks do have implications for the U.S. economy, she said.
Yellen noted, however, while the global economic situation poses risks, the net balance of risk was not all to the downside. She said the effects of a global slowdown would be cushioned because of an easing in financial market conditions that has come about because longer-term Treasury yields are down about 40 basis points since September, and because the FOMC has indicated that its sees as a main scenario a slightly more gradual pace of rate increases.
In her address, Yellen said she considered it appropriate for the Fed to move cautiously in adjusting monetary policy and advocated a gradual path to rising interest rates.
