Top quality municipal bonds were weaker at mid-session, according to traders, with yields on longer maturities moving up from record low levels.
In the primary, traders were seeing a new wave of supply hit the market on Wednesday, led by issuers in New York and California.
Secondary Market
The yield on the 30-year general obligation scale was one to three basis points stronger from Tuesday's record low of 2.39%, according to a read of Municipal Market Data's triple-A scale.
The yield on the 10-year benchmark muni was as much as two basis points stronger from 1.54% on Tuesday, according to MMD.
"Tax-exempt trading depicted a weaker bias beyond five-years on Wednesday as a flood of major new issues continued to hit the primary market and traders watched Treasury yields climb higher ahead of this afternoon's FOMC minutes," Gregory Saulnier, research analyst at MMD, wrote in a market comment. "Combined with an $11 billion tax-exempt primary calendar this week and already low absolute rates and muni/Treasury ratios, tax-exempt secondary trading was beginning to show signs of slippage."
U.S. Treasuries were also weaker on Wednesday. The yield on the two-year Treasury rose to 0.84% from 0.82% on Tuesday, while the 10-year Treasury yield gained to 1.81% from 1.76% and the yield on the 30-year Treasury bond increased to 2.65% from 2.59%.
The 10-year muni to Treasury ratio was calculated at 87.6% on Tuesday compared to 87.9% on Monday, while the 30-year muni to Treasury ratio stood at 92.4% versus 93.2%, according to MMD.
MSRB Previous Session's Activity
The Municipal Securities Rulemaking Board reported 39,585 trades on Tuesday on volume of $10.81 billion.
Primary Market
Bank of America Merrill Lynch priced New York City's $800.45 million of Fiscal 2016 Series E and F general obligation bonds for institutions on Wednesday after holding a two-day retail order period.
The $775.46 million of Series E GOs were priced to yield from 0.86% with a 5% coupon in 2019 to 2.88% with a 3% coupon in 2036. The 2017 and 2018 maturities were offered as sealed bids.
The $24.99 million of Series F GOs were priced to yield from 0.86% with a 3% coupon in 2019 to 2.77% with a 3% coupon in 2034. The 2016-2018 maturities were offered as sealed bids.
The NYC GOs are rated Aa2 by Moody's Investors Service and AA by S&P Global Ratings and Fitch Ratings.
BAML also priced the New York Metropolitan Transportation Authority's $583.52 million of Series 2016B dedicated tax green fund and refunding climate certified bonds for retail investors, with the institutional pricing taking place on Thursday.
The $410.79 million of Subseries 2016B-1 green bonds were priced for retail to yield from 0.85% with a 5% coupon in 2019 to 2.43% with a 5% coupon in 2036. A term bond in 2046 was priced to yield 2.59% with a 5% coupon. A term bond in 2051 was priced to yield 2.74% with a 5% coupon and a term bond in 2056 was priced to yield 2.79% with a 5% coupon. The 2016-2018 maturities were offered as sealed bids.
The $172.735 million of Subseries 2016B-2 refunding green bonds were priced for retail to yield from 1.79% with a 5% coupon in 2026 to 2.24% with a 4% coupon in 2030. The bonds were also priced to yield from 2.20% with a 5% coupon in 2032 to par with a 3% coupon in 2039. The deal is rated AA by both S&P and Fitch.
Roosevelt & Cross priced the Dormitory Authority of the State of New York's $206.48 million of Series E, F, G, H, I and J revenue bonds under the School Districts Revenue Bond Financing Program for retail investors on Wednesday.
The $79.68 million of Series 2016E bonds were priced to yield from 0.74% with a 2% coupon in 2017 to 2.58% with a 5% coupon in 2036; a 2041 maturity was priced as 3s to yield 3.11% and a 2044 maturity was priced as 3s to yield 3.14%. This series is rated A-plus by S&P and AA-minus by Fitch except for the 2041 and 2044 maturities which are insured by Build America Mutual and rated AA by S&P.
The $41.71 million of Series 2016F bonds were priced to yield from 0.67% with a 2% coupon in 2017 to 2.51% with a 5% coupon in 2036; a 2041 maturity was priced as 3s to yield 3.08% and a 2043 maturity was priced as 3s to yield 3.10%. This series is rated AA by S&P and AA-minus by Fitch.
The $36.87 million of Series 2016G bonds were priced to yield from 0.68% with a 2% coupon in 2017 to 2.25% with a 5% coupon in 2031. This series is rated AA-minus by S&P and Fitch.
The 21.37 million of Series 2016H bonds were priced to yield from 0.68% with a 2% coupon in 2017 to 2.25% with a 5% coupon in 2031. This series is rated Aa3 by Moody's and AA-minus by Fitch.
The $10.07 million of Series 2016I bonds were priced to yield from 0.84% with a 2% coupon in 2017 to 2.64% with a 2.50% coupon in 2031. This series is rated A-plus by S&P and AA-minus by Fitch except for the 2019-2031 maturities which are insured by Assured Guaranty Municipal and rated AA by S&P.
The $16.80 million of Series 2016J bonds were priced to yield from 0.84% with a 2% coupon in 2017 to 2.30% with a 5% coupon in 2029. This series is rated A-plus by S&P and AA-minus by Fitch except for the 2020-2029 maturities which are insured by AGM and rated AA by S&P.
In California, Goldman Sachs priced the Los Angeles Municipal Improvement Corp.'s $812.99 million of Series 2016A capital equipment and Series 2016B real property lease revenue refunding bonds.
The $125.46 million of Series 2016A bonds were priced to yield from 0.80% with 4% and 5% coupons in a split 2018 maturity to 1.94% with 4% and 5% coupons in a split 2026 maturity. The 2016 and 2017 maturities were offered as sealed bids.
The $687.53 million of Series 2016B bonds were priced to yield from 0.80% with 4% and 5% coupons in a split 2018 maturity to 3.02% with a 4% coupon in 2039. The 2016 and 2017 maturities were offered as sealed bids.
The deal is rated A-plus by S&P and Fitch and AA-minus by Kroll Bond Rating Agency.
Since 2006, LAMIC has issued about $2.69 billion of debt, with the largest issuance before this year occurring in 2006 when it sold $449 million of securities. The LAMIC did not issue any bonds in 2011 or 2013.
In the competitive arena, the Virginia College Building Authority sold $451.22 million of bonds in two separate sales, both for the 21st Century College and Equipment Program.
BAML won the $410.98 million of various educational facilities revenue and revenue refunding bonds with a true interest cost of 2.51%. The $361.36 million of Series 2016A educational facilities revenue bonds were priced to yield from 0.53% with a 5% coupon in 2017 to 3.05% with a 3% coupon in 2036. The $49.63 million of 2016B educational facilities revenue bonds were priced as 4s to yield 2.18% in 2028 and 2.28% in 2029.
Raymond James won the $40.24 million of Series 2016C taxable educational facilities revenue bonds with a TIC of 2.02%. Both deals are rated Aa1 by Moody's and AA-plus by S&P and Fitch.
Bond Buyer Visible Supply
The Bond Buyer's 30-day visible supply calendar decreased $3.96 billion to $13.53 billion on Wednesday. The total is comprised of $6.13 billion of competitive sales and $7.40 billion of negotiated deals.
