Top quality municipal bonds were stronger at mid-session, according to traders, as the University of California Medical Center deal came to market.
Secondary Market
The yield on the 10-year benchmark muni general obligation fell one to three basis points from 1.45% on Tuesday, while the yield on the 30-year muni dropped one to three basis points from 2.18%, according to a read of Municipal Market Data's triple-A scale.
Treasuries were stronger on Wednesday. The yield on the two-year Treasury declined to 0.69% from 0.71% on Tuesday, the 10-year Treasury yield dropped to 1.52% from 1.56% and the yield on the 30-year Treasury bond decreased to 2.24% from 2.27%.
On Tuesday, the 10-year muni to Treasury ratio was calculated at 93.9% compared to 91.7% on Monday, while the 30-year muni to Treasury ratio stood at 96.6% versus 94.9%, according to MMD.
MSRB: Previous Session's Activity
The Municipal Securities Rulemaking Board reported 34,236 trades on Tuesday on volume of $11.41 billion.
Primary Market
Barclays Capital Markets priced the Regents of the University of California Medical Center's $873 million of tax-exempt Series 2016L bonds on Wednesday after a one-day retail order period on Tuesday.
The tax-exempts were priced to yield from 0.50% with a 3% coupon in 2018 to 2.68% with a 4% coupon in 2038. A 2041 maturity was priced as 5s to yield 2.41%, a 2042 maturity was priced as 3s to yield approximately 3.056%, a 2044 maturity was priced as 4s to yield 2.74% and a 2047 maturity was priced as 5s to yield 2.46%. A 2017 maturity was offered as a sealed bid. A taxable portion is expected to be priced Wednesday.
The deal is rated Aa3 by Moody's Investors Service and AA-minus by S&P Global Ratings and Fitch Ratings. The credit carries stable outlooks from all three rating agencies.
Since 2006, the issuer has sold $22.57 billion of securities, with its highest volume in 2013 when it sold $4.7 billion. The regents have issued less than $1 billion twice since 2006 – in 2008 and 2014.
Citigroup priced the Utility Debt Securitization of New York's $469.46 million of Series 2016B restructuring bonds.
The issue was priced as 5s to yield 0.50% and 0.54% in a split 2019 maturity and as 5s to yield to 0.65% and 0.70% in a split 2020 maturity and to yield from 0.96% and 1.02% with a 5% coupon in a split 2022 maturity to 1.28% and 1.33% with a 5% coupon in a split 2025 maturity, as 5s to yield 1.53% and 1.57% in a split 2027 maturity, as 5s to yield 1.86% in 2030, and from 2.01% with a 5% coupon in 2032 to 2.34% with a 4% coupon and 2.16% with a 5% coupon in a split 2035 maturity.
The 2019 to 2027 maturities were priced to the maturity data while the 2030 to 2035 maturities were priced to the June 15, 2016, call date.
The deal is rated triple-A by Moody's, S&P and Fitch. The credit carries stable outlooks from all three agencies.
Citi is also slated to price the city of Port St. Lucie, Fla.'s $210 million of utility system revenue refunding bonds. The deal is rated A-plus by both S&P and Fitch Ratings.
Piper Jaffray is expected to price Johnson County Unified School District, Kan.'s $191.08 million of Series 2016B GO bonds. The deal is rated Aa2 by Moody's and AA by S&P.
In the competitive arena, the Louisville/Jefferson County Metropolitan Sewer District sold two separate sales totaling $102.03 million.
Morgan Stanley won the $71.16 million of Series 2016C sewer and drainage system revenue refunding bonds with a true interest cost of 1.11%. Hutchinson Shockey won the $30.88 million of Series 2016B sewer and drainage system revenue refunding bonds with a TIC of 2.09%.
Both deals are rated Aa3 by Moody's and AA by S&P.
Bond Buyer Visible Supply
The Bond Buyer's 30-day visible supply calendar decreased $1.933 billion to $9.83 billion on Wednesday. The total is comprised of $3.09 billion of competitive sales and $6.74 billion of negotiated deals.
Baird Advisors: Infrastructure a Hot Political Topic
At the recent Republican and Democratic national conventions, the topic of infrastructure spending in the U.S. was sharply in focus, according to a commentary released on Tuesday by Baird Advisors.
"GOP candidate Donald Trump, while not yet offering a specific plan, has talked repeatedly about the poor condition of U.S. roads, bridges and airports relative to other countries," the report said. "Democratic candidate Hillary Clinton has proposed spending $275 billion over five years [with] the intent to set up a national infrastructure bank which would leverage both public and private funds to spur large-scale projects."
Baird Advisors said it was unlikely that either party would fully fund the $3.3 trillion the American Society of Civil Engineers has said is needed through the next 10 years.
"While the municipal market will certainly play an important role in this process (e.g. new money municipal financing is up 9% year-to-date, from $91.6 billion to $99.9 billion), other funding sources are also needed to meet America's significant infrastructure needs," the report said.
