Top-quality municipal bonds were unchanged at mid-session, traders said, as Bank of America Merrill Lynch won the competitive bidding for the Illinois general obligation bonds.
BAML won the state's $480 million of Series of January 2016 unlimited tax GOs with a true interest cost of 3.9989%. Illinois sold no bonds last year but came to market several times in 2014.
The issue was priced to yield from 1.15% with a 5% coupon in 2017 to 4.13% with a 4% coupon in 2039; a 2041 maturity was priced as 5s to yield 4.27%.
Illinois saw spreads to the Municipal Market Data triple-A rated benchmark of 155 basis points on the 10-year maturity and 161 basis points on the 25-year bonds. The spreads are lower than 170 basis points over the MMD scale, where state paper had recently been trading.
Prior to this sale, the state last competitively sold bonds on April 10, 2014, when BAML won $250 million of Series of April 2014 GOs with a TIC of 4.08%. At its 2014 sales, Illinois saw spreads over the MMD benchmark of between 95 and 110 basis points for 10-year paper.
The bonds were rated Baa1 by Moody's Investors Service, A-minus by Standard & Poor's and triple-B-plus by Fitch Ratings except for the 2034 and 2037-2039 maturities which were insured by Assured Guaranty Municipal and rated A2 by Moody's and AA by S&P.
Chapman and Cutler and Pugh Jones & Johnson are bond counsel on the deal and Public Financial Management is advising the state.
Since 2006, Illinois has sold about $27 billion of bonds, with the most issuance occurring in 2010 and 1012 when it issued $8.68 billion and $5.11 billion, respectively.
Goldman, Sachs is set to price the New Jersey Turnpike Authority's $149 million of revenue bonds on Thursday. Proceeds of the sale are expected to refund all or part of its outstanding Series 2004B bonds.
The issue is rated A3 by Moody's, A-plus by S&P and A by Fitch.
Goldman is lead underwriter of a syndicate that includes PNC Capital Markets, RBC Capital Markets and Wells Fargo Securities. The financial advisor is First Southwest with Wilentz, Goldman & Spitzer as bond counsel.
Bond Buyer Visible Supply
The Bond Buyer's 30-day visible supply calendar rose $780.4 million to $8.90 billion on Thursday. The total is comprised of $4.38 billion competitive sales and $4.52 billion of negotiated deals.
Secondary Market
Top-quality municipal bonds were steady on Thursday. The yield on the 10-year benchmark muni general obligation was unchanged from 1.78% on Tuesday, while the 30-year muni yield was flat from 2.72%, according to a read of Municipal Market Data's triple-A scale.
"Dealers' coffers were still a little hefty after customer selling over the past few sessions, but ratios to treasuries were not so glaringly rich as they were last week," MMD Senior Market Analyst Randy Smolik wrote in a Thursday market comment. "Negotiated deals were still well received and many deals have been bumped from preliminary offerings."
Treasuries were mostly lower. The yield on the two-year Treasury was flat from 0.90% on Wednesday, while the 10-year Treasury yield rose to 2.08% from 2.05% and the 30-year Treasury bond yield increased to 2.88% from 2.84%.
The 10-year muni to Treasury ratio was calculated on Wednesday at 84.5% compared with 84.8% on Tuesday, while the 30-year muni to Treasury ratio stood at 94.9% versus 94.8%, according to MMD.
MSRB Previous Session's Activity
The Municipal Securities Rulemaking Board reported 41,133 trades on Wednesday on volume of $11.93 billion.
Muni CUSIP Requests Drop in December
The volume of requests for new municipal CUSIP identifiers declined in December to 1,037, a 9.6% drop from November, according to data released by CUSIP Global Services on Thursday.
The report tracks the issuance of new security identifiers as an early indicator of debt market activity. The latest data hint at continued volatility in new municipal bond issuance over the next several weeks.
On a year-over-year basis, muni identifier requests were up 16.1% for 2015, reflecting strong issuance ahead of the Federal Reserve's interest rate hike in December.
"A great deal of the activity in corporate and municipal bond issuance over the course of 2015 was defined by speculation around interest rates," Richard Peterson, Senior Director, S&P Capital IQ, said in a press release. "It is fitting, then, given the December move by the Fed that we're now seeing a slow-down to the fever pitch of bond issuance we saw earlier in the year. Expect that trend to continue throughout the first part of this year."
Regionally, municipal bond issuers in Texas saw the highest volume of new CUSIP identifiers in December, accounting for a total of 139 identifier requests during the month.
"While seasonality certainly plays a role in the December totals for corporate and municipal issuance, the CUSIP request volumes for the year 2015 paint a picture of a marketplace that's been closely monitoring interest rates for signs of change," said Gerard Faulkner, director of operations for CUSIP Global Services.
Tax-Exempt Money Market Funds Post Inflows
Tax-exempt money market funds experienced inflows of $416.1 million, bringing total net assets to $257.12 billion in the week ended Jan. 11, according to The Money Fund Report, a service of iMoneyNet.com. This followed an inflow of $2.54 billion to $256.71 billion in the previous week.
The average, seven-day simple yield for the 359 weekly reporting tax-exempt funds remained at 0.01% for the 141st straight week.
The total net assets of the 941 weekly reporting taxable money funds increased $11.48 billion to $2.504 trillion in the week ended Jan. 12, after an outflow of $16.06 billion to $2.492 trillion the prior week.
The average, seven-day simple yield for the taxable money funds increased to 0.07% from 0.06% in the prior week.
Overall, the combined total net assets of the 1,300 weekly reporting money funds rose $11.90 billion to $2.761 trillion in the period ended Jan. 12, which followed an outflow of $13.51 billion to $2.749 trillion in the prior week.
