Top-rated municipal bonds were stronger at mid-session, traders said, as the first of the week’s new issue slate came to market, led off by a big negotiated deal from Houston schools and a small competitive sale from the state of Michigan.
Primary Market
JPMorgan Securities priced the Houston Independent School District’s $743.130 million of Series 2016A limited tax schoolhouse and refunding bonds on Tuesday to yield from 0.79% with a 5% coupon in 2018 to 3.23% with a 4% coupon in 2041. The 2017 maturity was offered as a sealed bid. The deal is backed by the Permanent School Fund guarantee program and is rated triple-A by Moody’s Investors Service and Standard & Poor’s.
Morgan Stanley priced Tampa, Fla.’s $200 million of Series 2016A health system revenue bonds for Baycare Health System. The bonds were priced to yield from 1.93% with a 4% coupon in 2024 to 3.44% with a 3.25% coupon in 2037. A term bond in 2046 was priced as a split maturity to yield 3.60% with a 4% coupon and 3.13% with a 5% coupon. The deal is rated Aa2 by Moody’s and AA by Fitch Ratings.
Since 2006, the city of Tampa has sold only about $1.7 billion of bonds, with the largest issuance occurring in 2012 when it sold $500 million of bonds. The city did not come to market at all in 2008, 2009 or 2014.
Barclays Capital priced for retail investors California State University’s $1.34 billion of Series 2016 A & B revenue bonds ahead of the institutional pricing on Wednesday. The $1.1 billion Series 2016A was priced to yield from 0.62% with a 2% coupon in 2017 to 3.37% with a 3.25% coupon and 3.17% with a 4% coupon in a split 2037 maturity. A split term bond in 2045 was priced to yield 3.33% with a 4% coupon and 2.98% with a 5% coupon. No retail orders were taken in the 2029-2032, 2034, 2035 or 2041 maturities.
The $50 million Series B-1 was priced as a split maturity in 2047. Half was not offered to retail. The other half was priced to yield 1.15% with a 3% coupon.
The $100 million Series B-2 was priced as a split maturity in 2049. Half was not offered to retail. The other half was priced to yield 1.50% with a 4% coupon.
The $100 million Series B-3 was priced as a split maturity in 2051. Half was not offered to retail. The other half was priced to yield 1.88% with a 4% coupon. The bonds are rated Aa2 by Moody’s.
In the competitive arena on Tuesday, the state of Michigan sold $82.24 million of Series 2016A tax-exempt general obligation environmental program bonds. Wells Fargo won the bonds with a true interest cost of 1.54%. The bonds were priced to yield from 1.30% with a 5% coupon in 2021 to 1.81% with a 5% coupon in 2024. The deal is rated Aa1 by Moody’s and AA-minus by S&P.
The Central Florida Expressway Authority competitively sold $154.665 million of Series 2016A senior lien refunding revenue bonds. Bank of America Merrill Lynch won the bonds with a true interest cost of 3.26%. The bonds were priced to yield from 0.88% with a 3% coupon in 2017 to 3.07% with a 3% coupon in 2032. A 2036 term bond was priced to yield 3.335% with a 3.25% coupon, and a 2037 was priced to yield 3.27% with a 4% coupon. The issue is rated A2 by Moody’s and A by S&P and Fitch.
Palm Beach County, Fla., competitively sold $126.65 million of Series 2016 revenue refunding bonds. Raymond James won the bonds with a TIC of 3.07%. Pricing details were not immediately available. The deal is rated Aa1 by Moody’s and AA-plus by S&P and Fitch.
The Virginia Public School Authority competitively sold $160.595 million of Series 2016 special obligation school financing and refunding bonds. Wells Fargo Securities won the bonds with a TIC of 2.45%. The bonds were priced to yield from 0.73% with a 5% coupon in 2018 to 3.134% with a 3% coupon in 2036. The 2017 maturity was offered as a sealed bid. The bonds are rated triple-A by Moody’s, S&P and Fitch.
Secondary Trading
The yield on the 10-year benchmark muni general obligation was anywhere from one to three basis points lower from 1.82% on Monday, while the 30-year muni yield was as much as two basis points lower from 2.76%, according to a read of Municipal Market Data's triple-A scale.
U.S. Treasuries were stronger on Tuesday afternoon. The yield on the two-year Treasury decreased to 0.82% from 0.86% on Monday, while the 10-year Treasury yield declined to 1.82% from 1.86% and the 30-year Treasury bond yield fell to 2.62% from 2.66%.
The 10-year muni to Treasury ratio was calculated on Monday at 97.4% compared with 96.3% on Thursday, while the 30-year muni to Treasury ratio stood at 104.4% versus 103.8%, according to MMD.
MSRB Previous Session's Activity
The Municipal Securities Rulemaking Board reported 37,701 trades on Monday on volume of $7.78 billion.
Bond Buyer Visible Supply
The Bond Buyer's 30-day visible supply calendar rose $722.4 million to $9.91 billion on Tuesday. The total is comprised of $2.84 billion of competitive sales and $7.07 billion of negotiated deals.
