Top shelf municipal bonds firmed on Tuesday, according to traders, as water and wastewater deals from issuers in Texas, California and Colorado came to market.
Ramirez & Co. priced and repriced Austin's $247.77 million of Series 2016 water and wastewater system revenue refunding bonds.
The issue was repriced as 5s to yield from 0.92% in 2019 to 1.19% in 2021 and from 1.70% in 2025 to 2.56% in 2037. A 2041 maturity was priced to yield 2.67% and a 2045 maturity was priced to yield 2.72%.
Proceeds will refund 2006 and 2007 debt for savings and take out $190 million in commercial paper.
The deal is rated Aa2 by Moody's Investors Service, AA by S&P Global Ratings and AA-minus by Fitch Ratings.
Since 2006, Austin has sold about $7 billion of bonds including the current issue, with the largest issuance occurring in 2015 when it offered $1 billion of securities. It sold the least in 2007 when is issued $287 million of bonds.
In the competitive arena, the city and county of San Francisco's Public Utilities Commission sold more than $308 million of bonds in two deals, one of which was a green bond offering.
JPMorgan Securities won the $240.58 million of Series 2016A wastewater revenue green bonds with a true interest cost of 3.21%. The issue was priced to yield from 1.24% with a 5% coupon in 2023 to 2.70% with a 4% coupon in 2040; a 2042 maturity was priced as 4s to yield 2.75% and a 2046 maturity was priced as 4s to yield 2.79%.
JPMorgan also won the $67.82 million of Series 2016B wastewater revenue bonds with a TIC of 3.21%. The issue was priced to yield from 1.24% with a 5% coupon in 2023 to 2.70% with a 4% coupon in 2040; a 2042 maturity was priced as 4s to yield 2.75% and a 2046 maturity was priced as 4s to yield 2.79%.
Both deals are rated Aa3 by Moody's and AA by S&P.
The California Department of Water Resources sold $107.74 million of Series AV Central Valley Project water system revenue bonds.
Morgan Stanley won the deal with a TIC of 3.37%. Pricing information wasn't immediately available. The deal is rated Aa1 by Moody's and triple-A by S&P.
The city and county of Denver's Board of Water Commissioners sold $152.16 million of water bonds in two separate issues.
Citigroup won the $90.50 million of Series 2016A master resolution water revenue bonds with a TIC of 2.67%. The deal was priced to yield from 0.54% with a 5% coupon in 2017 to 2.91% with a 3% coupon in 2038. A 2040 maturity was priced at par to yield 3%, a 2042 maturity was priced as 3s to yield 3.08% and a 2045 maturity was priced as 3s to yield 3.12%.
Citi also won the $61.67 million of Series 2016B master resolution water refunding revenue bonds with a TIC of 2.33%. Both deals are rated triple-A by Moody's, S&P and Fitch.
The New Jersey Environmental Infrastructure Trust competitively offered $144 million of bonds in three sales. Bank of America Merrill won the $23.4 million of Series 2016A-1 environmental infrastructure green bonds with a TIC of 2.37% while JPMorgan won both the $56.9 million of Series 2016A-R1 environmental infrastructure refunding bonds with a TIC of 1.47% and the $64.15 million of Series 2016A-R2 environmental infrastructure refunding bonds with a TIC of 1.69%. All three sales are rated triple-A by Moody's, S&P and Fitch.
On Wednesday, Chicago is coming to market with a $546 million sale of tax-exempt and taxable and second lien water revenue bonds. PNC Capital Markets is expected to price the deal. The issue is rated AA by Kroll Bond Rating Agency.
Also on Wednesday, Bank of America Merrill Lynch is set to price the Alameda Corridor Transportation Authority, Calif.'s $662 million of Series 2016 A&B tax-exempt subordinate and second subordinate lien revenue refunding bonds.
The Series A bonds are rated Baa2 by Moody's and BBB-plus by S&P and Fitch. The Series B bonds are rated Baa2 by Moody's and BBB by S&P and Fitch.
Loop Capital Markets is set to price the Los Angeles International Airport's $293 million of Series 2016A subordinate revenue bonds on Wednesday. The deal, which is subject to the alternative minimum tax, is rated A1 by Moody's and AA-minus by S&P and Fitch.
Morgan Stanley is expected to price the state of Oregon's $306 million of Series 2016 D, E, F, G and H Article XI-M seismic projects and Article XI-Q state projects general obligation bonds on Wednesday. The bonds are rated Aa1 by Moody's and AA-plus by S&P and Fitch.
Secondary Market
The yield on the 10-year benchmark muni general obligation fell one basis point to 1.56% from 1.57% on Monday, while the 30-year muni yield declined one basis point to 2.48% from 2.49%, according to the final read of Municipal Market Data's triple-A scale.
U.S. Treasuries were mixed on Tuesday. The yield on the two-year Treasury rose to 0.72% from 0.71% on Monday, while the 10-year Treasury yield was unchanged from 1.76% and the yield on the 30-year Treasury bond decreased to 2.61% from 2.62%.
The 10-year muni to Treasury ratio was calculated at 88.8% on Tuesday compared with 89.4% on Monday, while the 30-year muni to Treasury ratio stood at 95.0% versus 95.1%, according to MMD.
Week's Top Managers
Bank of America Merrill Lynch was the top lead manager in the week ended May 7, according to Thomson Reuters data. BAML was bookrunner on $1.54 billion of deals in 17 separate issues, a market share of 15.9%. Coming in second was JPMorgan with $1.52 billion in 13 issues, a market share of 15.7%. Citi was third with $1.34 billion in 11 issues, a market share of 13.9%. RBC Capital Markets was fourth with $627.4 million in 16 issues, a market share of 6.5%. And Piper Jaffray came in fifth with $598.5 million in 19 issues, a market share of 6.2%.
BlackRock: Munis 10 for 10
For the 10th month in row, municipal bonds in April outperformed Treasuries, according to a market update released by BlackRock Municipals Group on Tuesday.
The S&P Municipal Bond Index returned 0.71% in April and 2.35% for the year to date, the report said, adding that longer-term maturities and lower-rated investment-grade issues outperformed on the month.
This was due mainly to robust demand for munis and manageable supply despite a murkier macro backdrop, the report added.
Crossover demand continued and despite unfavorable headlines from Puerto Rico, Chicago and Atlantic City, the core of the market remained healthy, BlackRock said.
"Puerto Rico imposed a drag on the high yield sector, despite very strong performance from tobacco bonds (up 2%)," the report stated, "Still, the broad high yield sector has low issuance, strong demand and is an important component of carry."
While munis became richer, they still held allure for most investors.
"Munis' outperformance of Treasuries has them looking less cheap on a relative basis, but we believe this does little to dilute the advantages of the asset class, particularly attractive tax-exempt income and a record of high quality and relative stability," the report said.
Muni demand, as measured by fund flows, was $5.3 billion in April and $20.3 billion for the year-to-date.
"We did not see the typical tax-time outflows this April. This is likely due to lower tax bills (given lackluster equity returns in 2015) and a continued demand for high-quality income, lower relative volatility and diversification away from equity and equity-like (corporate high yield) risk," BlackRock said.
