Top-quality municipal bonds weakened slightly by mid-session, according to traders, as an Illinois issuer sold bonds one day after the city of Chicago came to market and one day ahead of the state's sale on Thursday.
Secondary Market
The yield on the 10-year benchmark muni general obligation was as much as one basis point stronger from 1.78% on Tuesday, while the 30-year muni yield was as much as one basis point stronger from 2.73%, according to a read of Municipal Market Data's triple-A scale.
Treasuries were little changed on Wednesday. The yield on the two-year Treasury inched up to 0.92% from 0.91% on Tuesday, while the 10-year Treasury yield was flat from 2.10% and the 30-year Treasury bond yield was unchanged from 2.88%.
The 10-year muni to Treasury ratio was calculated on Tuesday at 84.8% compared with 82.5% on Monday, while the 30-year muni to Treasury ratio stood at 94.8% versus 92.4%, according to MMD.
MSRB Previous Session's Activity
The Municipal Securities Rulemaking Board reported 37,873 trades on Tuesday on volume of $6.60 billion.
Primary Market
The Illinois Regional Transportation Authority competitively sold $100 million of Series 2016A general obligation bonds on Wednesday.
JPMorgan won the issue with a true interest cost of 3.51%. Pricing information was not immediately available.
The bonds were rated Aa3 by Moody's Investors Service and AA by Standard & Poor's and Fitch Ratings.
The last time the RTA competitively sold comparable bonds was on Jan. 28, 2014, when Wells Fargo Securities won $99.30 million of Series 2014A GOs with a TIC of 4.38%.
The sale came one day after Chicago sold $500 million general obligation refunding and restructuring bonds. While spreads were narrower than in Chicago's most recent sales in the spring and summer, the city still paid a high rate to borrow due to its ongoing pension woes and credit deterioration.
The final pricing on the $500 million deal had a top yield of 4.875% in 2038. The 22-year rate represents a spread of 229 basis points to the triple-A rated Municipal Market Data benchmark and 139 basis points over the triple-B benchmark.
On Thursday, the state of Illinois will competitively sell $480 million of Series of 2016 GOs, its first bond issuance since 2014.
The bonds are rated Baa1 by Moody's Investors Service, A-minus by S&P and triple-B-plus by Fitch.
The last time the state competitively sold comparable bonds was on April 10, 2014, when Bank of America Merrill Lynch won $250 million GOs with a TIC of 4.08%.
Since 2006, the state has sold about $27 billion of bonds, with the most issuance occurring in 2010 and 1012 when it issued $8.68 billion and $5.11 billion, respectively. Illinois did not sell any bonds in 2015.
JPMorgan received the official award on the Illinois Housing Development Authority's $88.7 million of Series 2016A taxable homeowner mortgage revenue bonds. The issue was priced at par to yield from 1.108% in 2016 to 4.18% in 2029; a 2034 maturity was priced as 4s to yield 3.14%. The bonds were rated Aa3 by Moody's and AA by S&P.
Elsewhere, Seattle, Wash., sold $123.18 million of Series 2016B municipal light and power refunding revenue bonds on Wednesday. Citigroup won the issue with a TIC of 2.07%. The deal was priced to yield from 0.45% with a 5% coupon in 2016 to 2.45% with a 4% coupon in 2029.
Seattle also sold $32 million of Series 2016A taxable new clean renewable energy direct payment municipal light and power revenue bonds. Wells Fargo Securities won the bonds with a TIC of 4.05% and priced them as 4.05s to yield 4% in 2041.
Both issues were rated Aa2 by Moody's and AA by S&P.
In the negotiated sector, Bank of America Merrill Lynch received the official award on the Delaware Transportation Authority's $181.48 million of Series 2016 transportation system revenue bonds. The issue was priced to yield from 0.96% with a 3% coupon in 2019 to 2.55% and 2.51% with 2.50% and 3% coupons in a split 2029 maturity. The bonds were rated Aa2 by Moody's and AA-plus by S&P.
Bond Buyer Visible Supply
The Bond Buyer's 30-day visible supply calendar fell $5.41 billion to $8.12 billion on Wednesday. The total is comprised of $5.04 billion competitive sales and $3.08 billion of negotiated deals.
