Top-rated municipal bonds were weaker at mid-session, traders said, as the last few of the week's deals started to trickle into the market.
Secondary Market
The 10-year benchmark muni general obligation yield rose as much as one basis point from 2.25% on Wednesday, while the yield on the 30-year GO was as much as one basis point higher from 3.03%, according to a read of Municipal Market Data's triple-A scale.
U.S. Treasuries were weaker on Thursday. The yield on the two-year Treasury rose to 1.17% from 1.15% on Wednesday, while the 10-year Treasury gained to 2.39% from 2.35%, and the yield on the 30-year Treasury bond increased to 3.02% from 2.96%.
On Wednesday, the 10-year muni to Treasury ratio was calculated at 95.9% compared to 95.5% on Tuesday, while the 30-year muni to Treasury ratio stood at 102.4%, versus 101.4%, according to MMD.
MMD Sees Chicago Spreads Tightening
"Chicago GO spreads continue to narrow. We saw $2.7 million Chicago GO 5.25s of 1/2030 (c24) trade at 5.44% (+294 basis points) versus around +310 basis points last week and the original spread of +337 from the 1/19 loan," MMD Senior Market Strategist Daniel Berger wrote in a Thursday market comment. "There were also $5 million+ Chicago GO 5.25s of 1/2029 (c 24) that traded at 5.38% (+295 basis points) [Wednesday] versus 5.52% (+302 basis points) last week. Finally, $5 million Chicago GO 5.5s of 1/2035 (c 25) traded at 5.68% (+282 basis points) versus 5.79% last week (+287 basis points).
Berger said it was hard to pinpoint the reason for the moves.
"There has not been any news about Chicago (except for the school system which is a separate credit) to cause this change. Therefore we surmise that while there was a general credit spread tightening in munis, high-yield debt like Chicago and Puerto Rico was oversold and experienced a correction," Berger wrote. "At this point, Chicago buyers may not be traditional muni investors and they might work more on muni/Treasury ratios and other relative value measures to corporates and alternative investments."
MSRB: Previous Session's Activity
The Municipal Securities Rulemaking Board reported 42,207 trades on Wednesday on volume of $16.13 billion.
Primary Market
In the competitive arena, the South Broward Hospital District, Fla., sold $115.18 million of Series 2017 hospital refunding revenue bonds for the South Broward Hospital District Obligated Group.
Bank of America Merrill Lynch won the deal with a true interest cost of 3.17%.
The issue was priced to yield from 1.03% with a 5% coupon in 2018 to 3.49% with a 4% coupon in 2032.
The deal is rated Aa3 by Moody's Investors Service and AA by S&P Global Ratings.
Since 2007, the district has sold about $1 billion of debt, with the most issuance occurring in 2016 when it sold $333.7 million of bonds in three separate sales. The hospital district did not come to market in 2010-2014.
Late Wednesday, Citigroup priced Salt Lake City, Utah's $1 billion of airport revenue bonds for the Salt Lake City Airport.
The $826.22 million of Series 2017A bonds, subject to the alternative minimum tax, were priced as 5s to yield from 1.86% in 2021 to 3.66% in 2037, 3.73% in 2042 and 3.79% in 2047.
The $173.79 million of Series 2017B non-AMT bonds were priced as 5s to yield from 1.63% in 2021 to 3.39% in 2037, 3.44% in 2042 and 3.49% in 2047.
The deal is rated A2 by Moody's and A-plus by S&P.
Bond Buyer Visible Supply
The Bond Buyer's 30-day visible supply calendar decreased $3.38 billion to $6.49 billion on Thursday. The total is comprised of $2.28 billion of competitive sales and $4.22 billion of negotiated deals.
Tax-Exempt Money Market Fund Inflows
Tax-exempt money market funds experienced inflows of $1.30 billion, bringing total net assets to $131.81 billion in the week ended Feb. 6, according to The Money Fund Report, a service of iMoneyNet.com. This followed an outflow of $797.0 million to $130.51 billion in the previous week.
The average, seven-day simple yield for the 233 weekly reporting tax-exempt funds dropped to 0.22% from 0.23% in the previous week.
The total net assets of the 863 weekly reporting taxable money funds decreased $6.54 billion to $2.512 trillion in the week ended Feb. 7, after an outflow of $4.04 billion to $2.519 trillion the week before.
The average, seven-day simple yield for the taxable money funds was unchanged from 0.27% in the prior week.
Overall, the combined total net assets of the 1,096 weekly reporting money funds fell $5.24 billion to $2.644 trillion in the week ended Feb. 7, after outflows of $4.84 billion to $2.650 trillion in the prior week.
