It was a down day for municipal bonds as yields rose in the secondary market Thursday and the sizes of some deals in the primary were slashed.
"I wouldn't say deals were downsized or canceled because of levels or demand, I think the market is just a bit defensive with rates having risen for a few days," said a New York trader. "Especially with ratios and performance having been so positive so far this year, I think today was just taking a breather, in my opinion, waiting to see what the next move in treasury rates is going to be."
Citigroup priced the Mayor and City Council of Baltimore, Md.'s $247.975 million of Series 2017A-D revenue and revenue refunding bonds for water and wastewater projects on Thursday. The issue was originally expected to total about $486 million.
The $101.61 million of Series 2017A subordinate project revenue bonds were priced as 5s to yield from 0.80% in 2017 to 3.46% in 2036, 3.53% in 2041 and 3.58% in 2046.
The $94.085 million of Series 2017B subordinate project refunding revenue bonds were priced as 5s to yield from 0.80% in 2017 to 3.36% in 2036. A term bond in 2039 was priced as 5s to yield 3.41%.
The $52.28 million of Series 2017C forward delivery refunding revenue bonds were priced to yield 0.85% with a 5% coupon in 2017 to yield from 1.79% with a 5% coupon in 2021 to 2.03% with a 5% coupon in 2022. The bonds were also priced to yield from 2.70% with a 55 coupon in 2026 to 3.44% with a 5% coupon in 2036.
The deal is rated Aa2 by Moody's Investors Service and AA by S&P Global Ratings.
Since 2007, Baltimore has issued about $2.68 billion of debt, with the largest issuance occurring in 2013 when it sold $800 million. The city didn't come to market at all in 2012.
JPMorgan Securities priced as a remarketing the Connecticut Health and Educational Facilities Authority's $125 million of Series T-2 revenue bonds for Yale University.
The remarketing was priced at par to yield 1.65% in 2029 with a mandatory tender date of 2020. The deal is rated triple-A by Moody's and S&P.
In the competitive arena, the Sheldon Independent School District, Texas, sold $96.84 million of Series 2017 unlimited general obligation tax school building and refunding bonds. The issue was originally expected to total about $100.71 million.
Bank of America Merrill Lynch won the deal with a true interest cost of 3.48%. The issue was priced to yield from 1% with a 5% coupon in 2018 to 3.60% with a 4% coupon in 2040; a 2042 maturity was priced as 3 5/8s to yield about 3.78%.
The deal, which is backed by the Permanent School Fund, is rated triple-A by Moody's.
NYC Sets $800M GO Sale for Feb. 7
New York City will sell about $800 million of general obligation refunding bonds on Tuesday, Feb. 7, after a two-day retail order period on the previous Friday and Monday, the city announced on Thursday.
The bonds will be sold through the city's underwriting syndicate, led by book-running senior manager Citigroup. Bank of America Merrill Lynch, Goldman, Sachs, Jefferies, JPMorgan, Loop Capital Markets, Ramirez & Co., RBC Capital Markets, Siebert Cisneros Shank and Wells Fargo Securities will serve as co-senior managers.
Secondary Market
On Thursday, the 10-year benchmark muni general obligation yield rose one basis point to 2.35% from 2.34% on Wednesday, while the yield on the 30-year GO increased one basis point to 3.10% from 3.09%, according to the final read of Municipal Market Data's triple-A scale.
U.S. Treasuries were mostly stronger at Thursday's market close. The yield on the two-year Treasury dipped to 1.22% from 1.24% on Wednesday, while the 10-year Treasury yield rose to 2.51% from 2.47%, and the yield on the 30-year Treasury bond decreased to 3.09% from 3.10%.
On Thursday, the 10-year muni to Treasury ratio was calculated at 93.8% compared to 92.9% on Wednesday, while the 30-year muni to Treasury ratio stood at 100.4%, versus 99.5%, according to MMD.
Tax-Exempt Money Market Fund Inflows
Tax-exempt money market funds experienced inflows of $488.2 million, bringing total net assets to $131.30 billion in the week ended Jan. 23, according to The Money Fund Report, a service of iMoneyNet.com. This followed an outflow of $829.3 million to $130.81 billion in the previous week.
The average, seven-day simple yield for the 233 weekly reporting tax-exempt funds were unchanged from 0.23% in the previous week.
The total net assets of the 863 weekly reporting taxable money funds increased $17.03 billion to $2.523 trillion in the week ended Jan. 24, after an outflow of $26.25 billion to $2.506 trillion the week before.
The average, seven-day simple yield for the taxable money funds was flat from 0.26%.
Overall, the combined total net assets of the 1,099 weekly reporting money funds rose $17.52 billion to $2.654 trillion in the week ended Jan. 24 after outflows of $27.08 billion to $2.637 trillion in the prior week.
