Yields on long-dated municipal bonds dropped to new lows on Thursday, according to a final read of Municipal Market Data's triple-A benchmark scale.
The yield on 30-year muni general obligation fell seven basis points to 2.27% from Wednesday's record low of 2.34%, according to MMD, the third day in a row it set record lows.
The yield on 10-year benchmark muni dropped four basis points to 1.56% from 1.60% on Wednesday, according to MMD. It stands nine basis points above its all-time low of 1.47% set in 2012.
"The aggressive MMD curve bumps in the 25-30-year range of our curves related to the demand for term bonds in some of the largest negotiated loans priced today," said MMD Senior Market Analyst Randy Smolik. "Most notable were the 5% couponed terms of (Aa2/AA) $543 million Harris County Toll, Texas, that saw spreads pared from +30 basis points to +17 basis points in the final pricing. The terms on (Aa2/AA-) $225 million Los Angeles DWAP-Power System saw spreads on their terms pared five to six basis points. Their maximum yielding 5% coupon bonds were only +two basis points to MMD, at least six basis points tighter than recent trading seen in the secondary. Finding sizeable dollar-bond blocks in the secondary is limited."
U.S. Treasuries were stronger on Thursday after the sale of $12 billion of 30-year bonds. Indications of foreign demand remained high for the U.S. bonds with almost 65% of the sale going to indirect bidders after yesterday's sale of $20 billion of reopened 10-year notes garnered a record number (about 74%) of indirect bidders.
Indirect bidders include customers placing competitive bids through a direct submitter, including foreign and international monetary authorities placing bids through the New York Federal Reserve Bank.
The recent high averages that indirect bidders take at auctions for government securities are about 42% for 30-years and 47% for 10-years.
"Certainly some of the muni market leadership has come from flatter curves in other related bond markets," Smolik said. "As central banks like BOJ and the ECB push their short and intermediate rates into negative territory, foreign buyers are forced further out the curve."
The yield on the two-year Treasury dipped to 0.76% on Thursday from 0.78% on Wednesday, while the 10-year Treasury yield dropped to 1.68% from 1.70% and the yield on the 30-year Treasury bond decreased to 2.48% from 2.51%.
The 10-year muni to Treasury ratio was calculated at 93.0% on Thursday compared to 94.0% on Wednesday, while the 30-year muni to Treasury ratio stood at 91.5% versus 93.2%, according to MMD.
Primary Market
Massachusetts hit the market with $550 million of general obligation bonds in two separate competitive sales.
JPMorgan Securities won the $495 million of Consolidated Loan of 2016 Series E GOs with a true interest cost of 3.29%. The bonds were priced as 4s to yield 2.29% in 2033, 2.43% in 2035 and 2.54% in 2038, as 3s to yield 3.08% in 2041, as 4s to yield 2.60% in 2042, as 3s to yield 3.10% in 2044 and as 4s to yield 2.64% in 2046.
JPMorgan also won the $55 million of Consolidated Loan of 2016 Series D GOs with a TIC of 1.46%. The bonds were prices as 5s to yield from 1.20% in 2022 to 1.63% in 2026.
The deals are rated Aa1 by Moody's Investors Service and AA-plus by S&P Global Ratings and Fitch Ratings. Moody's and Fitch assign stable outlooks while S&P assigns a negative outlook to the credit.
Last week, Gov. Charlie Baker and state Treasurer Deborah Goldberg visited the rating agencies in New York to speak with them about the sale.
"We place a heavy emphasis on the maintenance of our ratings," Goldberg said.
Since 2006, Massachusetts has issued about $26.4 billion of debt, with the largest issuance occurring in 2014 when it sold $3.6 billion of securities. The Bay State has sold more than $2 billion a year every year since 2006, except in 2008, 2011 and 2012. With the year not nearing its mid-point, it appears the state will get surpass that mark again.
Also on the competitive slate, South Broward Hospital District, Fla., sold $168.03 million of Series 2016 hospital refunding revenue bonds.
PNC Capital Markets won the bonds with a TIC of 2.89%. Pricing information was not available. The deal is rated Aa3 by Moody's and AA by S&P.
In the negotiated sector, Loop Capital Markets priced and repriced Harris County, Texas' $543.41 million of Series 2016A toll road senior lien revenue refunding bonds.
The issue was repriced to yield 0.89% with a 5% coupon in 2019 and from 1.20% with 2.75% and 5% coupons in a split 2021 maturity to 2.44% with a 5% coupon in 2036. A 2041 term bond was repriced as 5s to yield 2.46% and a 2047 term was priced as 5s to yield 2.51%. The deal is rated Aa2 by Moody's and AA by Fitch.
Ramirez & Co. priced and repriced the Los Angeles Department of Water and Power's $225 million of Series 2016B power system revenue bonds.
The issue was repriced to yield from 1.05% with a 5% coupon in 2021 to 2.31% with a 5% coupon in 2038; a 2042 maturity was priced as 5s to yield 2.33%, a 2045 maturity was priced as 5s to yield 2.36%, and a 2046 maturity was priced as 4s to yield 2.62%. The deal is rated Aa2 by Moody's and AA-minus by S&P and Fitch.
JPMorgan Securities priced the New York City Housing Development Corp.'s $377.01 million of multi-family housing revenue bonds.
The $180.35 million of Series 2016C-1 fixed-rate sustainable neighborhood bonds were remarketed at par to yield from 1.20% in 2019 to 2.50% and 2.55% in a split 2027 maturity, 2.85% in 2031, 3.15% in 2036, 3.30% in 2041, 3.40% in 2047 and 3.45% in 2050.
The $32.82 million of Series 2016C-2 term-rate sustainable neighborhood bonds were remarketed at par to yield 1.45% in 2050; they have a mandatory tender in 2020.
The $163.84 million of Series 2016E fixed-rate sustainable neighborhood bonds were priced to yield from 0.40% at par in 2016 to 2.50% and 2.55% at par in a split 2027 maturity; a 2031 maturity was priced at par to yield 2.85%, a 2036 maturity was priced at par to yield 3.15%, a 2041 maturity was priced at par to yield 3.30%, and a 2047 maturity was priced at par to yield 3.40%.
The bonds are rated Aa2 by Moody's and AA-plus by S&P.
Tax-Exempt Money Market Funds See Outflows
Tax-exempt money market funds experienced outflows of $546.1 million, bringing total net assets to $208.41 billion in the week ended June 6, according to The Money Fund Report, a service of iMoneyNet.com. This followed an outflow of $2.45 million to $208.95 billion in the previous week.
The average, seven-day simple yield for the 297 weekly reporting tax-exempt funds was unchanged at 0.06%.
The total net assets of the 889 weekly reporting taxable money funds increased $20.53 billion to $2.509 trillion in the week ended June 7, after an outflow of $14.69 billion to $2.488 trillion the week before.
The average, seven-day simple yield for the taxable money funds remained at 0.11%.
Overall, the combined total net assets of the 1,186 weekly reporting money funds increased $19.98 billion to $2.717 trillion in the period ended June 7, which followed an outflow of $17.14 billion to $2.697 trillion.
