Top-rated municipal bonds were weaker at mid-session, traders said, as the market moved into wary mode ahead of the Federal Reserve’s monetary policy announcement later Wednesday afternoon.
In the primary, the big Connecticut deal was priced for institutions.
The Federal Open Market Committee is expected to leave its target for interest rates unchanged, but Fed observers will be parsing the language of its statement and analyzing its new “dot plot” for clues as to future rate moves.
In December 2015, the Fed was leaning toward four rate hikes in 2016, a fact later confirmed by Fed officials. But many market participants now feel the Fed may be looking to three or only two hikes this year.
“It would be very bullish for the market if it looks like the Fed is leaning toward only two hikes this year,” a market source said, who added the Fed’s Summary of Economic Projections is only that, a forecast and not reality. “The market has priced in only one hike for the year and that’s for this December.”
The yield on the 10-year benchmark muni general obligation was as much as one basis point stronger from 1.90% on Tuesday, while the 30-year muni yield was as much as one basis point stronger from 2.84%, according to a read of Municipal Market Data's triple-A scale.
U.S. Treasuries were mixed on Wednesday. The yield on the two-year Treasury rose to 0.99% from 0.96% on Tuesday, while the 10-year Treasury yield gained to 1.98% from 1.96% and the 30-year Treasury bond yield was unchanged from 2.72%.
The 10-year muni to Treasury ratio was calculated on Tuesday at 97.0% compared to 96.4% on Monday, while the 30-year muni to Treasury ratio stood at 104.4% versus 104.3%, according to MMD.
MSRB Previous Session's Activity
The Municipal Securities Rulemaking Board reported 36,671 trades on Tuesday on volume of $10.94 billion.
Primary Market
Ramirez & Co. priced Connecticut’s $550 million of general obligation bonds for institutions on Wednesday after a one-day retail order period.
The issue was priced for institutions to yield from 1.23% with 2%, 3% and 4% coupons in a triple split 2019 maturity to 3.50% with a 4% coupon in 2036; the 2017 and 2018 maturities were offered as sealed bids.
On Tuesday, the issue was priced for retail to yield from 1.14% with 2%, 3% and 4% coupons in a triple split 2019 maturity to 3.46% with a 4% coupon in half of a split 2036 maturity. No retail orders were taken in the 2028, 2032-32, 2034-35 maturities or in second half of the 2036 split maturity. The 2017-18 maturities were offered as sealed bids.
The deal is rated Aa3 by Moody’s Investors Service and AA by S&P, Fitch and Kroll Bond Rating Agency. All four rating agencies have a negative outlook on the state.
Since 2006, Connecticut has sold about $28 billion of debt, with the largest issuances in 2008 and 2009 when it offered $4.2 billion and $3.8 billion, respectively. The Constitution State had low years of issuance in 2006 and 2007, when it came to market with $1.9 billion and $1.3 billion, respectively.
Robert W. Baird & Co. priced Winston-Salem, N.C.’s $135.73 million of Series 2016A water and sewer system revenue refunding bonds and Series 2016B taxable water and sewer system revenue refunding bonds.
The $124.40 million of Series 2016A bonds were priced to yield from 0.72% with a 3% coupon in 2018 to 3.26% with a 3.125% coupon in 2039. The $11.33 million of Series 2016B bonds were priced at par to yield from 0.63% in 2016 to 1.38% in 2019. The deal was rated Aa1 by Moody’s, triple-A by S&P and AA-plus by Fitch.
On Tuesday, the city sold a total of $67.93 million of GOs and taxable GOs in four competitive sales.
Morgan Stanley priced the California Health Facilities Financing Authority’s $177.61 million of Series 2016A refunding revenue bonds and Series 2016B revenue bonds for the Lucile Packard Children’s Hospital at Stanford.
The $77.61 million of Series 2016A bonds were priced as 5s to yield from 0.82% in 2018 to 2.82% in 2033; the 2016-17 maturities were offered as sealed bids. The $100 million of Series 2016B bonds were priced as 5s to yield 3.41% in a 2055 bullet maturity. The deal is rated Aa3 by Moody’s, AA-minus by S&P and AA by Fitch.
JPMorgan Securities priced for retail the Nashville and Davidson County Health and Educational Facilities, Tenn.’s $483.995million of Series 2016A revenue bonds for the Vanderbilt University Medical Center.
The deal was priced for retail as 5s to yield 3.14% in 2029 and 3.21% in 2030. No retail orders were taken in the 2031, 2035, 2040 or 2046 maturities. The bonds are rated A3 by Moody’s.
Bond Buyer Visible Supply
The Bond Buyer's 30-day visible supply calendar fell $2.32 billion to $4.86 billion on Wednesday. The total is comprised of $1.71 billion of competitive sales and $3.15 billion of negotiated deals.
