Top-rated municipal bonds finished steady to stronger on Monday, according to traders, who are preparing for a week manageable supply slate, near record low muni yields and a meeting of Federal Reserve policy makers.
The yield on 10-year benchmark muni general obligation on Monday fell one basis point to 1.51% from 1.52% on Friday, while the 30-year muni yield was steady at 2.22%, according to the final read of Municipal Market Data's triple-A scale.
The yield on 10-year muni is now only four basis points above its all-time low of 1.47% set in 2012. On Friday, June 10, the yield on 30-year muni dropped to its fourth straight record low.
Rates have been falling steadily over the past year. On June 10, 2015, the yield on the 10-year muni stood at 2.38% and the 30-year muni yield was at 3.36%.
U.S. Treasuries were stronger on Monday. The yield on the two-year Treasury dropped to 0.71% from 0.73% on Friday, while the 10-year Treasury yield declined to 1.61% from 1.63% and the yield on the 30-year Treasury bond decreased to 2.43% from 2.44%.
The 10-year muni to Treasury ratio was calculated at 93.5% on Monday compared to 92.9% on Friday, while the 30-year muni to Treasury ratio stood at 91.3% versus 90.7%, according to MMD.
Primary Market
This week's bond sales will be taking place in the shadow of a Federal Reserve meeting. The Federal Open Market Committee is set to gather in Washington on Tuesday and Wednesday to decide the course of monetary policy. Most observers think the Fed won't make any move to raise interest rates.
The week's $5.7 billion new issue calendar consists of about $3.7 billion of negotiated deals and $2.0 billion of competitive sales.
Action kicked off on Monday, when the New York State Environmental Facilities Corp. came to market with $490.6 million of Series 2016A state clean water and drinking water revolving funds revenue bonds.
Goldman Sachs priced the NYS EFC's issue, New York City Municipal Water Finance Authority Projects Second Resolution bonds, for retail investors ahead of the institutional pricing on Tuesday.
The bonds were priced to yield from 0.68% with 2% and 5% coupons in a split 2018 maturity to 2.42% with a 4% coupon in 2036; a 2046 term bond was priced as 2 5/8s to yield 2.72%. A 2017 maturity was offered as a sealed bid. No retail orders were taken in the 2027-2030, 2032-2035, 2041 and 2045 maturities.
The bonds are rated triple-A by Moody's Investors Service and S&P Global Ratings and AA-plus by Fitch Ratings.
JPMorgan Securities priced the Maryland Economic Development Corp.'s $312.42 million of private activity revenue bonds for the Purple Line Light Rail project. The deal is subject to the alternative minimum tax.
The $100 million of Series 2016A RSA green bonds were priced as 5s to yield 1.89% in 2024. The $23.32 million of Series 2016B FCP green bonds were priced as 5s to yield 2.10% in 2026. The $27.48 million of Series 2016C SLP green bonds were priced as 5s to yield from 2.04% and 2.09% in a split 2025 maturity to 2.22% and 2.24% in a split 2028 maturity. The $161.62 million of Series 2016D AP green bonds were priced as 5s to yield from 1.94% in 2023 to 2.78% in 2032 and as 5s to yield 2.84% in 2036, 2.87% in 2041, 2.89% in 2046 and 2.97% in 2051.
The deal is expected to be rated BBB-plus by S&P and Fitch and A (low) by DBRS on the Series 2016 A and B bonds and a BBB (high) on the Series 2016 C and D bonds.
On Tuesday, JPMorgan is set to price the Metropolitan Washington Airports Authority's $375 million of Series 2016A AMT and Series 2016B non-AMT airport system revenue refunding bonds. The deal is rated A1 by Moody's and AA-minus by S&P and Fitch.
Barclays Capital is expected to price Cook County, Ill.'s $300 million of Series 2016A GO refunding bonds on Tuesday. The deal is rated A2 by Moody's, AA-minus by S&P and A-plus by Fitch.
JPMorgan is expected to price the California Infrastructure and Economic Development Bank's $138.41 million of Series 2016A infrastructure state revolving fund revenue bonds on Tuesday. The deal is rated Aa1 by Moody's and triple-A by S&P and Fitch.
In the competitive arena on Tuesday, the Florida State Board of Education will sell $145.41 million of Series 2016C public education capital outlay refunding bonds. The deal is rated Aa1 by Moody's and triple-A by S&P and Fitch.
The biggest deal of the week is coming out of the Land of Lincoln on Thursday. The state of Illinois is putting up for competitive bid $550 million of its Series 2016 general obligation bonds. The bonds are now rated Baa2 by Moody's and BBB-plus by S&P and Fitch. All three raters have negative outlooks on the credit.
Illinois last competitively sold GOs on Jan. 14, when Bank of America Merrill Lynch won $480 million Series of January 2016 GOs with a true interest cost of 3.9989%. It was the state's first sale after a 20-monthj hiatus and the proceeds were to be used mostly for transportation projects. That issue was priced with a top yield of 4.27% in 2041, which was 161 basis points over the comparable maturity on MMD's triple-A scale.
Also on Thursday, Bank of America Merrill Lynch is expected to price the Dutchess County Local Development Corp., N.Y.'s $378.01 million of Series 2016B revenue and revenue refunding bonds for Health Quest Systems. The deal consists of $28.01 million of Series 2016A revenue refunding bonds and $350 million of Series 2016B revenue bonds. The issue is rated A3 by Moody's and A-minus by S&P.
In the short-term competitive arena, the New York Metropolitan Transportation Authority is selling $700 million of bond anticipation notes in two separate sales on Thursday. The deals consist of $350 million of Series 2016A Subseries 2016A-1 dedicated tax BANs and $350 million of Series 2016A Subseries 2016A-2 dedicated tax BANs.
MSRB: Previous Session's Activity
The Municipal Securities Rulemaking Board reported 32,221 trades on Friday on volume of $12.77 billion.
Prior Week's Actively Traded Issues
Revenue bonds comprised 51.74% of new issuance in the week ended June 10, down from 52.19% in the previous week, according to data
General obligation bonds comprised 40.59% of total issuance, down from 40.94%, while taxable bonds made up 7.67%, up from 6.87%.
Some of the most actively traded issues by type were from California, New York and Indiana issuers. In the GO bond sector, the Los Angeles County, Calif. 3s of 2017 were traded 74 times. In the revenue bond sector, the New York Transportation Development Corp. 5s of 2031 were traded 105 times. And in the taxable bond sector, the Indiana State Financing Authority 3.624s of 2036 were traded 28 times, Markit said.
Previous Week's Top Underwriters
The top negotiated and competitive underwriters of last week included JPMorgan Securities, Bank of America Merrill Lynch, Citigroup, Morgan Stanley and Piper Jaffray, according to Thomson Reuters data. In the week of June 5-June 11, JPMorgan underwrote $2.43 billion, BAML did $2.37 billion, Citi had $2.07 billion, Morgan Stanley did $821.8 million and Piper had $743.2 million.
