Top-quality municipal bonds finished weaker on Thursday as the last of the week’s larger sales came to market in the primary sector, led by issuance from Mississippi and Hawaii.

Goldman Sachs said the Wisconsin Public Finance Authority’s $1.1 billion of revenue bonds for the American Dream development project in East Rutherford, N.J., originally scheduled to sell this week, would be priced sometime next week.

Secondary market
The yield on the 10-year benchmark muni general obligation rose two basis points to 1.86% from 1.84% on Wednesday, while the 30-year GO yield increased one basis point to 2.70% from 2.69%, according to the final read of Municipal Market Data's triple-A scale.

Treasuries were mixed on Thursday. The yield on the two-year Treasury gained to 1.35% from 1.34% on Wednesday, the 10-year Treasury yield increased to 2.16% from 2.14% and the yield on the 30-year Treasury bond was unchanged at 2.78%.

The 10-year muni to Treasury ratio was calculated at 86.1% on Thursday, compared with 86.1% on Tuesday, while the 30-year muni to Treasury ratio stood at 96.9% versus 96.7%, according to MMD.

MSRB: Previous session's activity
The Municipal Securities Rulemaking Board reported 41,426 trades on Wednesday on volume of $11.44 billion.

Primary market

The delay in the American Dream deal probably was due to a number of factors, said Lisa Washburn, managing director at Municipal Market Analytics.

“It is a complicated financing of an extraordinarily large project that has a multitude of risks (35+ pages is a lot!) and a pretty weak bondholder security package,” she said in an e-mail. “Layer in that the senior lenders struck a different deal that included guarantees from the entities with interests in the Mall of America and West Edmonton Mall; so there’s the added issue that the interests between them and the bondholders may not be aligned if there are troubles.”

The issue consists of $800 million of limited obligation PILOT revenue bonds and $300 million of limited obligation grant revenue bonds.

The unrated deal is expected to see good demand from institutions looking for high-yielding muni paper in New Jersey.

On Thursday, Morgan Stanley priced and repriced the state of Mississippi’s $443.72 million of Series 2017A general obligation bonds.

The bonds were repriced to yield from 1.00% with a 3% coupon in 2018 to 3.23% with a 4% coupon in 2036.

The deal is rated Aa2 by Moody’s Investors Service and AA by S&P Global Ratings and Fitch Ratings.

“Despite the fact that the state is on negative watch from two rating agencies, I thought the scale was cheaper than one would expect,” said a Southern trader. “Like most larger deals that have come of late, it was well over[subscribed].”

According to the state, the deal was 1.8 times over-subscribed.

“We are pleased about the positive response we received regarding the current refunding bond sale today that created a savings of over $30 million for the state of Mississippi,” said Laura Jackson, executive director of the Mississippi Department of Finance and Administration.

Since 2007, Mississippi has sold about $5.87 billion of securities, with the most issuance occurring in 2015, when it sold $1.21 billion.

The Magnolia State's low year of issuance came in 2014, when it sold just $7 million. With Thursday’s sale, the state surpasses last year’s sale total.

Bank of America Merrill Lynch priced and repriced the Hawaiian Electric Co. Inc.’s $265 million of special purpose revenue refunding bonds.

The $125 million of Series 2017A bonds were repriced at par to yield 3.10% in a 2026 bullet maturity. The $140 million of Series 2017B bonds were repriced at par to yield 4.00% in a 2037 bullet maturity.

The deal is rated Baa2 by Moody’s and A-minus by Fitch.

Citigroup priced and repriced the city of Long Beach, Calif.’s $172 million of harbor revenue bonds.

The $103.01 million of Series 2017A bonds subject to the alternative minimum tax were priced as 5s to yield from 2.14% in 2026 to 3.03% in 2037 and 3.08% in 2040.

The $26.4 million of Series 2017B green AMT bonds were priced as 5s to yield 3.12% in a 2043 bullet maturity.

The $43.08 million of Series 2017C non-AMT bonds were priced as 5s to yield 2.93% in a 2047 bullet maturity.

The deal is rated AA by S&P and Fitch.

Morgan Stanley priced and repriced the city of Tucson, Ariz.’s $107.11 million of Series 2017 water system revenue and revenue refunding obligations.

The issue was priced to yield from 0.99% with a 4% coupon in 2018 to 2.71% with a 5% coupon in 2035.

The deal is rated Aa2 by Moody’s and AA by S&P and Fitch.

BAML priced and repriced the California Municipal Finance Authority’s $100.67 million of Series 2017B revenue refunding bonds for Eisenhower Medical Center.

The bonds were repriced to yield from 2.06% with a 5% coupon in 2024 to 3.46% with a 5% coupon in 2037. The bonds were also repriced to yield 3.88% with a 5% coupon and 3.50% with a 5% coupon in a split term bond in 2042 and to yield 3.93% with a 4% coupon and 3.56% with a 5% coupon in a split term bond in 2047.

The deal is rated Baa2 by Moody’s and BBB by Fitch.

In the competitive arena on Thursday, the Rock Hill School District No. 3 of York County, S.C., sold $100 million of Series 2017B GOs.

Morgan Stanley won the bonds with a true interest cost of 2.95%. Pricing information was not available. The deal is rated Aa1 by Moody’s and AA by S&P.


Tax-exempt money market funds see outflows
Tax-exempt money market funds experienced outflows of $764.1 million, bringing total net assets to $129.67 billion in the week ended June 12, according to The Money Fund Report, a service of iMoneyNet.com.

This followed an inflow of $1.1 million to $130.44 billion in the previous week.

The average, seven-day simple yield for the 232 weekly reporting tax-exempt funds declined to 0.30% from 0.31% in the previous week.

The total net assets of the 851 weekly reporting taxable money funds decreased $5.24 billion to $2.496 trillion in the week ended June 13, after an inflow of $3.51 billion to $2.501 trillion the week before.

The average, seven-day simple yield for the taxable money funds increased to 0.49% from 0.47% in the prior week.

Overall, the combined total net assets of the 1,083 weekly reporting money funds decreased $6.01 billion to $2.626 trillion in the week ended June 13, after inflows of $4.61 billion to $2.632 trillion in the prior week.

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Chip Barnett

Chip Barnett

Chip Barnett is a journalist with more than 40 years of experience. Barnett is currently Senior Market Reporter for The Bond Buyer.
Aaron Weitzman

Aaron Weitzman

Aaron Weitzman is a markets reporter for The Bond Buyer, focusing on the sell side of the municipal bond market.