Municipal bond traders saw two big education issues come to market on Thursday along with a healthcare and a gasworks deal. Top quality munis finished a basis point stronger, they said.
In the competitive arena, the Los Angeles Unified School District, Calif., increased the size of its Series 2016B general obligation refunding, dedicated unlimited ad valorem property tax bonds to $500.86 million from $455.44 million.
Morgan Stanley won the deal with a true interest cost of 2.29%. The issue was priced as 5s to yield 0.45% in 2018 and to yield from 1.36% with a 5% coupon in 2025 to 2.45% with a 3% coupon in 2032. The deal is rated Aa2 by Moody's Investors Service and AAA by Fitch Ratings.
The last time the LAUSD competitively sold comparable bonds was on May 6, 2015, when JPMorgan Securities won $326.05 million of Series 2015A GO refunding bonds with a TIC of 1.87%.
Since 2006, the LAUSD has sold $14.86 billion of securities, with the largest issuance coming in 2009 when it offered $2.92 billion. The district has issued over $2 billion dollars four times since 2006, but has also issued less than $500 million five times over the same span.
In the negotiated sector, HilltopSecurities priced the Grapevine-Colleyville Independent School District, Texas $161.16 million of Series 2016 unlimited tax school building bonds.
The issue was priced to yield from 0.48% with a 3% coupon in 2017 to 2.17% with a 5% coupon in 2035; a 2037 maturity was priced as 5s to yield 2.21% and a 2041 maturity was priced as 3s to yield 2.83%.
The deal, which is backed by the Permanent School Fund guarantee program, is rated triple-A by Moody's and S&P Global Ratings.
Additionally, Wells Fargo Securities priced the North Carolina Medical Care Commission's $100.29 million of Series 2017 health system revenue refunding bonds for the Mission Health Combine Group. The deal has a forward settlement date of July 13, 2017, with a first coupon payment on Oct. 1, 2017.
The issue was priced as 5s to yield from 1.34% in 2018 to 1.56% in 2020 and to yield from 2.41% in 2026 to 2.97% in 2036.
Wells also priced the N.C. Med Care's $53.99 million of Series 2016 health system revenue refunding bonds for the Mission Health Combine Group. The issue is dated Sept. 14 with a first coupon of Oct. 1, 2016. The deal was priced to yield from 0.89% with a 3% coupon in 2020 to 3% at par in 2035.
The deals are rated Aa3 by Moody's and AA-minus by S&P and Fitch and carry stable outlooks from all three agencies.
Bank of America Merrill Lynch received the official award on Philadelphia's $311.82 million of 14th Series 1998 General Ordinance gas work revenue refunding bonds.
The issue was priced to yield from 0.59% with a 2% coupon in 2016 to 2.88% with a 4% coupon in 2037. The deal is rated Baa1 by Moody's, A by S&P and BBB-plus by Fitch.
Secondary Market
The yield on the 10-year benchmark muni general obligation fell one basis point to 1.40% from 1.41% on Wednesday, while the yield on the 30-year muni dropped one basis point to 2.12% from 2.13%, according to the final read of Municipal Market Data's triple-A scale.
U.S. Treasuries were also stronger on Thursday. The yield on the two-year Treasury declined to 0.71% from 0.73% on Wednesday, the 10-year Treasury yield dipped to 1.54% from 1.56% and the yield on the 30-year Treasury bond decreased to 2.26% from 2.27%.
The 10-year muni to Treasury ratio was calculated at 91.3% on Thursday compared to 90.7% on Wednesday, while the 30-year muni to Treasury ratio stood at 93.8% versus 94.0%, according to MMD.
"A regular element of our Thursday comments for 45 weeks now is reporting positive flows to municipal mutual funds. The theme [continued on Thursday] morning with ICI data showing they attracted another $1.5 billion of net new assets in the week ending Aug. 10, bringing the 2016 inflow total above $43 billion, surpassing all past years' paces," Janney Municipal Strategist Alan Schankel wrote in a market comment.
MSRB: Previous Session's Activity
The Municipal Securities Rulemaking Board reported 37,822 trades on Wednesday on volume of $15.75 billion.
"A firm tone was evident in [Wednesday's] very active trading session, which saw $15.8 billion in secondary trading volume, the busiest pace in more than two months," Schankel wrote in the market comment.
Puerto Rico Sales Tax Bonds Trade Higher
The Puerto Rico Sales Tax Financing Corp.'s First Sub-Series A of 2009 revenue 6s of 2042 traded on Thursday at a high price of 53.75 cents on the dollar, a low yield of 11.715%, in 22 trades on volume of $6.85 million, according to the MSRB's EMMA website. On Wednesday, the 6s of 2042 traded at a high price of 53.55 cents on the dollar, a low yield of 11.757%, in 62 trades on volume of $10.03 million.
According to Markit, the STFC's Series 2011C Senior revenue 5s of 2040 traded at a yield of 7.60% on Thursday down from 7.73% on Wednesday.
Tax-Exempt Money Market Fund Outflows
Tax-exempt money market funds experienced outflows of $8.74 billion, bringing total net assets to $170.97 billion in the week ended Aug. 15, according to The Money Fund Report, a service of iMoneyNet.com. This followed an outflow of $4.45 billion to $179.71 billion in the previous week.
The average, seven-day simple yield for the 270 weekly reporting tax-exempt funds rose to 0.09% from 0.08% in the previous week.
The total net assets of the 884 weekly reporting taxable money funds decreased $5.35 billion to $2.523 trillion in the week ended Aug. 16, after an outflow of $6.09 billion to $2.528 trillion the prior before.
The average, seven-day simple yield for the taxable money funds remained at 0.11% from the week before.
Overall, the combined total net assets of the 1,154 weekly reporting money funds fell $14.09 billion to $2.694 trillion in the period ended Aug. 16, which followed an outflow of $10.54 billion to $2.708 trillion.
