Top-rated municipal bonds were stronger in early activity, according to traders, who will be seeing most of the week's supply come to market on Thursday.
Secondary Market
The 10-year benchmark muni general obligation yield fell as much as two basis points from 2.30% on Wednesday, while the yield on the 30-year GO dropped as much as one basis point from 3.03%, according to a read of Municipal Market Data's triple-A scale.
U.S. Treasuries were stronger on Thursday. The yield on the two-year Treasury declined to 1.20% from 1.23% on Wednesday, while the 10-year Treasury yield decreased to 2.41% from 2.46%, and the yield on the 30-year Treasury bond dropped to 3.02% from 3.05%.
On Wednesday, the 10-year muni to Treasury ratio was calculated at 93.8% compared with 94.6% on Tuesday, while the 30-year muni to Treasury ratio stood at 99.5%, versus 100.0%, according to MMD.
MSRB: Previous Session's Activity
The Municipal Securities Rulemaking Board reported 51,597 trades on Wednesday on volume of $12.97 billion.
Primary Market
Barclays Capital is set to price the Board of Regents of the Texas State University System's $570.83 million of Series 2017A revenue financing system revenue and refunding bonds on Thursday.
The deal is rated Aa2 by Moody's Investors Service and AA by Fitch Ratings.
Since 2007, TSUS has sold roughly $1.64 billion of securities, with the largest issuance before this year occurring in 2015 when it sold $315 million. The university has issued less than $100 million five times during the same time period and did not come to market at all in 2007 or 2016.
JPMorgan Securities is expected to price the Board of Regents of the University of North Texas' $214.92 million of Series 2017A revenue financing system refunding and improvement bonds on Thursday. The deal is rated Aa2 by Moody's and AA by Fitch.
Barclays is set to price the Board of Regents of the University of North Texas' $164.99 million of Series 2017B taxable revenue financing and improvement bonds on Thursday. The deal is rated Aa2 by Moody's and AA by Fitch.
Wells Fargo Securities is expected to price the University of Pittsburgh, Pa.'s $525 million of Series 2017A taxable university refunding bonds on Thursday. The deal is rated Aa1 by Moody's and AA-plus by S&P Global Ratings.
Wells Fargo is also set to price the District of Columbia's $311.52 million of Series 2017 refunding revenue bonds for Georgetown University on Thursday. The deal is rated A2 by Moody's and A by S&P.
Citigroup is set to price the New York State Housing Finance Agency's $120 million of affordable housing Series 2017A climate bond certified green bonds and Series 2017B revenue bonds on Thursday.
Piper Jaffray received the written award on the El Paso Independent School District, Texas' $181.84 million of Series 2017 unlimited tax school building bonds. The issue was priced to yield from 2.61% with a 5% coupon in 2027 to 3.21% with a 5% coupon in 2038; a split 2042 maturity was priced as 5s to yield 3.28% and as 4s to yield 3.70%. The deal, which is backed by the Permanent School Fund guarantee program, is rated triple-A by Moody's and Fitch.
In the competitive arena, the Cheery Creek School District Number 5, Colo., will sell $150 million of Series 2017 general obligation bonds on Thursday. The deal is rated Aa1 by Moody's and AA by S&P.
The Florida Department of Transportation will competitively sell $148.21 million of Series 2016C turnpike revenue refunding bonds on Thursday. The deal is rated Aa2 by Moody's and AA by S&P and Fitch.
In the short-term competitive arena, Colorado is selling $375 million of Series 2016B education loan program tax and revenue anticipation notes Thursday. The deal is rated MIG1 by Moody's and SP1-plus by S&P.
Janney Looks at Chicago's $1.1B GO Sale
Chicago's much anticipated $1.1 billion of general obligation bonds will be coming to market the week of Jan. 16, according to underwriter Goldman Sachs.
The city is rated Ba1 by Moody's, BBB-plus by S&P and Kroll Bond Rating Agency and BBB-minus by Fitch.
"Chicago, which has felt credit pressure from increasing pension and debt service costs, will be using the proceeds of the 2017 bond sale for 'scoop and toss' restructuring of debt as well as citywide capital projects," Eric Kazatsky, Janney's director of municipal credit research, wrote in a Thursday market comment. "Drivers of the lower ratings include woefully underfunded pensions at approximately 23% and elevated total fixed costs for debt service, pensions and OPEB measuring close to 38% of total expenditures."
There was a bright spot in the city's financial position, however.
"Positively, Chicago has adjusted the water-sewer tax, which will increase from $0.59/1,000 gallons to $2.51/1,000 gallons, as part of the plan to address rising pension costs over the next five years," Kazatsky said.
Bond Buyer Visible Supply
The Bond Buyer's 30-day visible supply calendar increased $3.17 billion to $13.26 billion on Thursday. The total is comprised of $2.64 billion of competitive sales and $10.61 billion of negotiated deals.
Tax-Exempt Money Market Fund Outflows
Tax-exempt money market funds experienced outflows of $851.3 million, bringing total net assets to $130.27 billion in the week ended Jan. 2, according to The Money Fund Report, a service of iMoneyNet.com. This followed an outflow of $172.6 million to $131.12 billion in the previous week.
The average, seven-day simple yield for the 237 weekly reporting tax-exempt funds increased to 0.27% from 0.25% in the previous week.
The total net assets of the 863 weekly reporting taxable money funds decreased $20.11 billion to $2.547 trillion in the week ended Jan. 3, after an inflow of $11.07 billion to $2.567 trillion the week before.
The average, seven-day simple yield for the taxable money funds increased to 0.24% from 0.23% in the previous week.
Overall, the combined total net assets of the 1,100 weekly reporting money funds fell $20.96 billion to $2.677 trillion in the week ended Jan. 3 after inflows of $10.90 billion to $2.696 trillion in the prior week.
