Top quality municipal bonds were stronger at mid-session, traders said, with yields on some maturities falling by as much as four basis points.
In the primary, large deals from California, New York State and Boston were priced for institutions after being offered to retail investors on Monday.
Secondary Market
The yield on the 10-year benchmark muni general obligation was as much as one basis point weaker from 1.90% on Monday, while the 30-year muni yield was two to four basis points weaker from 2.90%, according to a read of Municipal Market Data's triple-A scale.
Treasuries were higher on Tuesday. The yield on the two-year Treasury fell to 0.87% from 0.90% on Monday, while the 10-year Treasury yield dropped to 1.82% from 1.90% and the 30-year Treasury bond yield decreased to 2.61% from 2.71%.
U.S. stock prices declined with the Dow Jones Industrial Average dropping about 0.5%; the Nasdaq Composite Index and the S&P 500 Index both fell about 0.8%.
The 10-year muni to Treasury ratio was calculated on Monday at 100.0% compared to 101.6% on Friday, while the 30-year muni to Treasury ratio stood at 107.4% versus 107.4%, according to MMD.
MSRB Previous Session's Activity
The Municipal Securities Rulemaking Board reported 33,192 trades on Monday on volume of $5.19 billion.
Primary Market
Citigroup priced California’s $2.36 billion of general obligation bonds for institutions after a one-day retail order period.
The $789.42 million of various purpose GOs were priced to yield from 0.81% with 3% and 5% coupons in a split 2018 maturity to 2.20% with a 5% coupon in 2026; and as 4s to yield 3.10% in 2032, as 4s to yield 3.27% in 2035, and as 4s to yield 3.49% and 5s to yield 3.14% in a split 2045 maturity. The 2016 and 2017 maturities were offered as sealed bids.
The $69.98 million of school facilities GOs were priced as 4s to yield 2.98% in 2031 and 3.10% in 2032.
The $1.25 billion of various purposed GO refunding bonds were priced to yield from 0.81% with 4% and 5% coupons in a split 2018 maturity to 3.32% with a 4% coupon and 2.97% with a 5% coupon in a split 2036 maturity. The 2016 and 2017 maturities were offered as sealed bids.
The Golden State deal is rated Aa3 by Moody’s Investors Service, AA-minus by Standard & Poor’s and A-plus by Fitch Ratings.
Since 2006, the state of California issued bonds an average of 8.4 times a year, selling about $93 billion, with the largest issuances in 2007 and 2009 when it offered $12.2 billion and $23.2 billion, respectively. The lows came in 2006 and 2011, when it issued $4.6 billion and $4.9 billion.
Bank of America Merrill Lynch priced the Empire State Development Corp. Urban Development Corp.’s $1.26 billion of Series 2016A general purpose personal income tax revenue bonds for institutions after a one-day retail order period.
The New York issue was priced to yield from 0.66% with a 5% coupon in 2018 to 3.50% at par in 2038. The bonds are rated triple-A by S&P and AA-plus by Fitch.
Since 2010, the ESDC has issued about $9.75 billion of debt, with the most issuance occurring in 2013 when it sold $3.28 billion of bonds after not coming to market in 2012.
In the competitive arena, Boston sold $148.11 million of bonds in two sales.
Citigroup won the $140 million of Series 2016A GOs with a true interest cost of 2.26%. The issue was priced to yield from 0.46% with a 5% coupon in 2017 to 3.12% with a 3% coupon in 2036.
BAML won the $8.11 million of Series 2016B GO refunding bonds with a TIC of 2.10%. The bonds were priced as 4s to yield 1.90% in 2026 and 2.10% in 2027.
Both sales are rated triple-A by Moody’s and S&P.
Since 2006, Boston has issued bonds an average of 2.4 times a year, selling about $1.9 billion, with the largest issuances in 2012 and 2015 when it offered $261 million and $267 million, respectively. The lows came in 2006 and 2014, when Beantown issued $80 million and $153 million, respectively.
Also on Tuesday, Lancaster, Pa., competitively sold $125.8 million of Series 2016 GO combined purpose bonds. Morgan Stanley won the issue with a TIC of 3.497%. Pricing information was not immediately available. The bonds are rated A1 by Moody’s.
Bond Buyer Visible Supply
The Bond Buyer's 30-day visible supply calendar rose $575.4 million to $12.22 billion on Tuesday. The total is comprised of $3.38 billion of competitive sales and $8.84 billion of negotiated deals.
