Munis strengthen as new deals sell; CUSIP requests surge

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The municipal market saw some new supply hit the screens on Wednesday despite the Federal Open Market Committee meeting in Washington.

The Federal Reserve is expected to hike interest rates at the conclusion of its two-day meeting, followed by Chair Janet Yellen’s final press conference.

The market, which has priced in a rate increase, will focus mostly on the Summary of Economic Projections to see if members' projections for next year have changed.

Muni market participants are also eyeing tax reform talks in Washington.

Total municipal offerings CUSIP requests increased 20% in November to 1,372 from 1,219 in October, CUSIP Global Services said on Wednesday. Municipal bond CUSIP orders totaled 1,220 last month, up from 1,018 in the prior month.

The surge is due in large part to a tax reform proposal from the House, which introduces a prohibition on advanced refundings, which states and municipalities use to reduce borrowing costs, and on private activity bonds, CUSIP said. The Senate version of the bill preserves private activity bonds, but eliminates advance refundings.

“Starting in the last week of November and continuing so far into December, we’ve been seeing a significant increase in requests for municipal refunding bond and private activity bond identifiers as issuers rush to raise capital ahead of tax reform,” said Gerard Faulkner, director of operations for CUSIP Global Services. “Depending on whether the House or Senate version of the tax reform bill is passed, advance refundings and private activity bonds could be terminated, which could significantly alter the muni landscape.”

Long-term muni note requests fell to 20 in November from to 44 in October while short-term muni note demand also dropped to 82 orders from 107 in the previous month.

For the year through November, total municipal security CUSIP orders for all asset classes was 13,820, down 19% from 17,153 orders in the same period last year.

Among leading state activity, CUSIPs for scheduled public finance offerings from Texas issuers were the most active in November with 165 orders. Illinois was second with 110 municipal CUSIP orders followed by California issuers with 104 CUSIP requests.

For the year to date, Texas muni issuers rank first for orders with 1,474 requests followed by New York with 1,332 and California with 1,109.

Issuers were also taking note.

Wisconsin accelerated its GO refunding plans both due to the threat posed by the potential elimination of advance refundings under the proposed tax reform bills and due to the market rally.

“Without the latter” the refunding wouldn’t generate sufficient savings, said state capital finance director Dave Erdman. The state also recently came to market with a transportation refunding that was accelerated due to tax reform threats.

Primary market
In the competitive arena on Wednesday, the Board of Regents of the University of Houston System sold $324.36 million of Series 2017C consolidated revenue and refunding bonds.

JPMorgan Securities won the bonds with a true interest cost of 3.2949%. Pricing information was not immediately available.

The deal is rated Aa2 by Moody’s Investors Service and AA by S&P Global Ratings.

Goldman Sachs priced the Dormitory Authority of the State of New York’s $294.42 million of revenue bonds for Memorial Sloan-Kettering Cancer Center.
The bonds were priced to yield from 1.17% with a 5% coupon in 2018 to 3.26% with a 4% coupon in 2037. A term bond in 2042 was priced to yield 2.97% with a 5% coupon and a term bond in 2047 was priced to yield 3.42% with a 4% coupon.

The DASNY deal is rated Aa3 by Moody’s, AA-minus by S&P and AA by Fitch Ratings.

RBC Capital Markets priced the Florida Housing Finance Corp.’s $200 million of Series 2017-1 homeowner revenue bonds not subject to the alternative minimum tax.

The issue was priced at par to yield from 1.80% in 2020 to 2.85% and 2.90% in 2028, 3.25% in 2032, 3.60% in 2037, 3.75% in 2042, and 3.80% in 2047. A 2048 planned amortization class maturity was priced as 4s to yield 2.36% with an average life of 4.99 years.

The deal is rated Aaa by Moody’s.

Jefferies priced Suffolk County, N.Y.’s $417.884 million of GO tax anticipation notes for 2018 taxes and bond anticipation notes, series 2017 B.

The $410 million of TANs were priced to yield 1.57% with a 2.50% coupon with a July 25, 2018, maturity. The $7.884 million of BANs were priced to yield 1.65% with a 3% coupon with a Dec. 28, 2018, maturity.

The deal is rated SP-1 by S&P and F1 by Fitch.

Citigroup is set to price the Colorado Public Finance Authority’s $196 million of Series 2017 revenue bonds subject to the alternative minimum tax for the Denver International Airport’s Great Hall project.

The deal is rated BBB by S&P and Fitch.

JPMorgan Securities is expected to price Oregon’s $108.8 million Series 2017UV general obligation veterans welfare bonds.

The deal is rated Aa1 by Moody’s and AA-plus by S&P and Fitch.

Since 2007, the Beaver State has issued roughly $5.45 billion of bonds, with the most issuance before this year occurring in 2015 when it sold $712 million of bonds. The state saw a low year of issuance in 2009 when it sold $107 million.
Bond Buyer 30-day visible supply at $15.71B
The Bond Buyer's 30-day visible supply calendar decreased $5.68 billion to $15.71 billion on Wednesday. The total is comprised of $2.85 billion of competitive sales and $12.86 billion of negotiated deals.

Secondary trading
The MBIS municipal non-callable 5% GO benchmark scale was stronger in midday trading.

The 10-year muni benchmark yield fell to 2.299% on Wednesday from the final read of 2.329% on Tuesday, according to Municipal Bond Information Services. The MBIS 30-year benchmark muni yield decreased to 2.779% from 2.802%.

The MBIS benchmark index, which is comprised of investment-grade municipal securities, is updated hourly on the Bond Buyer Data Workstation.

Top-rated municipal bonds were stronger at mid-session. The yield on the 10-year benchmark muni general obligation fell two to four basis points from 2.05% on Tuesday, while the 30-year GO yield dropped three to five basis points from 2.68%, according to a read of MMD’s triple-A scale.

U.S. Treasuries were narrowly mixed on Wednesday. The yield on the two-year Treasury was flat from 1.84%, the 10-year Treasury yield declined to 2.39% from 2.42% and the yield on the 30-year Treasury decreased to 2.75% from 2.80%.

On Monday, the 10-year muni-to-Treasury ratio was calculated at 85.4% compared with 84.3% on Monday, while the 30-year muni-to-Treasury ratio stood at 96.4% versus 95.3%, according to MMD.

MSRB: Previous session's activity
The Municipal Securities Rulemaking Board reported 45,956 trades on Tuesday on volume of $13.03 billion.

Data appearing in this article from Municipal Bond Information Services, including the MBIS municipal bond index, is available on The Bond Buyer Data Workstation. Click here for a brief tour of the Workstation, or contact Vanessa Kim at 212-803-8474 for more information.

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Primary bond market Secondary bond market New York State Dormitory Authority Florida Housing Finance Corporation Suffolk County Public Finance Authority State of Oregon