Top-rated municipal bonds were stronger at Tuesday's close, traders said, as yields were as much as four basis points lower in some maturities.
The first of the week's new issue slate came to market, led off by a big negotiated deal from Houston schools and a small competitive sale from the state of Michigan. Retail investors also wet their beaks as they got a chance to buy $1.3 billion offering from the Trustees of the California State University.
Primary Market
JPMorgan Securities priced and then repriced the Houston Independent School District's $743.130 million of Series 2016A limited tax schoolhouse and refunding bonds on Tuesday to yield from 0.60% with a 5% coupon in 2017 to 3.17% with a 4% coupon in 2041. The deal is backed by the Permanent School Fund guarantee program and is rated triple-A by Moody's Investors Service and Standard & Poor's.
Morgan Stanley priced Tampa, Fla.'s $200 million of Series 2016A health system revenue bonds for Baycare Health System. The bonds were priced to yield from 1.93% with a 4% coupon in 2024 to 3.44% with a 3.25% coupon in 2037. A term bond in 2046 was priced as a split maturity to yield 3.60% with a 4% coupon and 3.13% with a 5% coupon. The deal is rated Aa2 by Moody's and AA by Fitch Ratings.
Since 2006, the city of Tampa has sold only about $1.7 billion of bonds, with the largest issuance occurring in 2012 when it sold $500 million of bonds. The city did not come to market at all in 2008, 2009 or 2014.
Barclays Capital priced California State University's $1.34 billion of Series 2016 A & B revenue bonds for retail investors before the institutional pricing on Wednesday. The $1.1 billion Series 2016A was priced to yield from 0.62% with a 2% coupon in 2017 to 3.37% with a 3.25% coupon and 3.17% with a 4% coupon in a split 2037 maturity. A split term bond in 2045 was priced to yield 3.33% with a 4% coupon and 2.98% with a 5% coupon. No retail orders were taken in the 2029-2032, 2034, 2035 or 2041 maturities.
The $50 million Series B-1 was priced as a split maturity in 2047. Half was not offered to retail. The other half was priced to yield 1.15% with a 3% coupon.
The $100 million Series B-2 was priced as a split maturity in 2049. Half was not offered to retail. The other half was priced to yield 1.50% with a 4% coupon.
The $100 million Series B-3 was priced as a split maturity in 2051. Half was not offered to retail. The other half was priced to yield 1.88% with a 4% coupon. The bonds are rated Aa2 by Moody's.
In the competitive arena, the state of Michigan sold $82.24 million of Series 2016A tax-exempt general obligation environmental program bonds. Wells Fargo won the bonds with a true interest cost of 1.54%. The bonds were priced to yield from 1.30% with a 5% coupon in 2021 to 1.81% with a 5% coupon in 2024. The deal is rated Aa1 by Moody's and AA-minus by S&P.
"I'm very pleased with the results of this sale," said state Treasurer Nick Khouri. "The intense investor interest and winning bid is clear market confirmation of the strong financial and economic foundation of the State of Michigan. Today's transaction provides significant resources to help better the quality of life of our residents without sacrificing what makes Michigan a sound investment."
Bond proceeds will be used to fund the Great Lakes Water Quality ("GLWQ") program. Authorized by a State-wide vote in 2002, the GLWQ finances environmental programs at the local level, that improve water quality by financing sewage treatment, storm water, and water pollution projects.
"Improving our environment continues to be a priority for Michiganders," said Keith Creagh, director of the Department of Environmental Quality. "I am thrilled that our work to get the state's finances back on track allows us to save our taxpayers real dollars when we deliver on those priorities on behalf of local units of government."
The Central Florida Expressway Authority competitively sold $154.665 million of Series 2016A senior lien refunding revenue bonds. Bank of America Merrill Lynch won the bonds with a true interest cost of 3.26%. The bonds were priced to yield from 0.88% with a 3% coupon in 2017 to 3.07% with a 3% coupon in 2032. A 2036 term bond was priced to yield 3.335% with a 3.25% coupon, and a 2037 was priced to yield 3.27% with a 4% coupon. The issue is rated A2 by Moody's and A by S&P and Fitch.
Palm Beach County, Fla., competitively sold $121.035 million of Series 2016 revenue refunding bonds. Raymond James won the bonds with a TIC of 3.07%. The bonds were priced to yield from 0.87% with a 5% coupon in 2019 to 2.78% with a 5% coupon in 2038. The deal is rated Aa1 by Moody's and AA-plus by S&P and Fitch.
The Virginia Public School Authority competitively sold $171.31 million of Series 2016 special obligation school financing and refunding bonds. Wells Fargo Securities won the bonds with a TIC of 2.45%. The bonds were priced to yield from 0.60% with a 5% coupon in 2017 to 3.134% with a 3% coupon in 2036. The bonds are rated triple-A by Moody's, S&P and Fitch.
Secondary Trading
The yield on the 10-year benchmark muni general obligation was four basis points lower to 1.78% from 1.82% on Monday, while the 30-year muni yield was three basis points lower to 2.73% from 2.76%, according to a final read of Municipal Market Data's triple-A scale.
U.S. Treasuries were stronger on Tuesday afternoon. The yield on the two-year Treasury decreased to 0.79% from 0.86% on Monday, while the 10-year Treasury yield declined to 1.82% from 1.86% and the 30-year Treasury bond yield fell to 2.61% from 2.66%.
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.
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 $2.16 billion of competitive sales and $6.09 billion of negotiated deals.
