Munis strengthen as new deals start to hit the market

Municipal bonds were stronger at midday as the first of the week’s new issue supply hit the screens.

Secondary market
The yield on the 10-year benchmark muni general obligation fell one to three basis points from 1.86% on Monday, while the 30-year GO yield declined one to three basis points from 2.69%, according to a read of Municipal Market Data's triple-A scale.

U.S. Treasuries were also stronger on Tuesday. The yield on the two-year Treasury dropped to 1.28% from 1.31% on Monday as the 10-year Treasury yield declined to 2.14% from 2.18% while the yield on the 30-year Treasury bond decreased to 2.80% from 2.84%.

On Monday, the 10-year muni to Treasury ratio was calculated at 85.2%, compared with 86.2% on Friday, while the 30-year muni to Treasury ratio stood at 94.7% versus 95.7%, according to MMD.

MSRB: Previous session's activity
The Municipal Securities Rulemaking Board reported 40,424 trades on Monday on volume of $7.06 billion.

Primary Market
On Tuesday, RBC Capital Markets priced the Metropolitan Washington Airports Authority’s $523.79 million of Series 2017A airport system revenue refunding bonds, subject to the alternative minimum tax.

The bonds were priced to yield from 0.98% with a 5% coupon in 2018 to 3.11% with a 5% coupon in 2037. A 2042 term bond was priced to yield 3.19% with a 5% coupon and a 2047 term was priced to yield 3.25% with a 5% coupon. The 2017 maturity was offered as a sealed bid.

The deal is rated Aa3 by Moody’s Investors service and AA-minus by S&P Global Ratings and Fitch Ratings.

Morgan Stanley priced the Regional Transportation District, Colo.’s $120.09 million of Series 2017B sale tax revenue bonds for the Fasttracks Project.

The issue was priced to yield from 2.66% with a 5% coupon in 2033 to 3.13% with a 4% coupon in 2036.

The deal is rated Aa2 by Moody’s, AA-plus by S&P and AA by Fitch.

In the short-term negotiated sector, Citigroup priced Los Angeles County, Calif.’s $800 million of 2017-2018 tax and revenue anticipation notes.

The notes were priced as 5s to yield 0.90% in 2018 with no optional call and interest paid at maturity.

The TRANs are rated MIG1 by Moody’s, SP1-plus by S&P and F1-plus by Fitch.

Since 2007, the county has issued roughly $10.40 billion of note deals, with the highest amount occurring in 2009 through 2011 when it sold $1.3 billion in each of those years. The county saw low note issuance totals in 2007 and 2008, when it issued just $500 million.

BB-060717-MUN

In the competitive arena on Tuesday, the Virginia College Building Authority sold $251.04 million of Series 2017A & B education facilities revenue and revenue refunding bonds for the 21st Century College and equipment program.

Citigroup won the deal with a true interest cost of 1.58%. The $76.04 million of Series 2017A revenue bonds were priced as 5s to yield from 0.80% in 2018 to 1.47% in 2024. The $175 million of Series 2017B revenue refunding bonds were priced as 5s to yield from 0.80% in 2018 to 2.04% in 2028.

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

Seattle, Wash., sold $239.92 million of Series 2017 drainage and wastewater system improvement and refunding revenue bonds.

PNC Capital Markets won the deal with a TIC of 3.15%. Pricing information was not immediately available.

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

Orange County, Fla., is selling $202.73 million of Series 2017 tourist development tax refunding revenue bonds.

Wells Fargo Securities won the deal with a TIC of 2.05%. The issue was priced as 5s to yield from 0.88% in 2018 to 1.35% in 2022 and from 1.83% in 2025 to 2.50% in 2030.

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

And the New Hampshire Bond Bank sold $118.71 million of Series 2017B revenue bonds. BAML won the deal with a TIC of 2.98%.

The issue was priced to yield from 0.80% with a 5% coupon in 2018 to 3.15% with a 3% coupon in 2037. A term bond in 2042 was priced to yield 3.18% with a 4% coupon and a term bond in 2046 was priced to yield 3.23% with a 4% coupon.

The deal is rated Aa2 by Moody’s and AA-plus by S&P.

Also on Tuesday, Barclays Capital is expected to price the East Bay Municipal Utility District, Calif.’s $453.84 million of Series 2017A water system revenue green bonds and Series 2017B water system revenue refunding bonds. The deal is rated Aa1 by Moody’s, AAA by S&P and AA-plus by Fitch.

Siebert Cisneros Shank is set to price the city of Chicago’s $399.71 million of Series 2017A project and Series 2017B refunding second lien wastewater transmission revenue bonds. The deal is rated A by S&P and AA-minus by Fitch and Kroll Bond Rating Agency.

Bank of America Merrill Lynch is expected to price the Board of Regents of the Texas A&M University System’s $398.66 million of Series 2017B revenue financing system bonds. The deal is rated triple-A by Moody’s, S&P and Fitch.

Bond Buyer 30-day visible supply
The Bond Buyer's 30-day visible supply calendar increased $115.6 million to $12.24 billion on Tuesday. The total is comprised of $5.11 billion of competitive sales and $7.13 billion of negotiated deals.

Ramirez: Gross supply to decline
Gross municipal bond supply in May was $39 billion, up 35% month over month and up 3% compared to May 2016, with year to date gross issuance running at $151 billion, down 5% year over year, according to Ramirez & Co.’s weekly market comment.

“Given the trend of low gross issuance year-to-date, we reaffirm our long-term new issue gross supply forecast at $368 billion, for a decline of about $60 billion, or 14% year over year,” the report said. “Our supply forecast incorporates $204 billion of new money bonds and $164 billion of refundings.”

The report said that net supply through May was up $1.4 billion, but added that in the next 30 days the market will shrink by around $38 billion as bonds mature or are called early.

Ramirez estimates that coupon payments in June will be about $54 billion.

“States driving the supply deficit include New York (-$8.94 billion), California (-$7.11 billion), New Jersey (-$4.36 billion), Arizona (-$2.41 billion), and Pennsylvania (-$1.87 billion),” the report said.

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