Top-quality municipal bonds were weaker at mid-session, traders said, as more supply hit the market.
Secondary Market
The yield on the 10-year benchmark muni general obligation rose two to four basis points from 1.33% on Monday, while the yield on the 30-year muni increased two to four basis points from 1.96%, according to a read of Municipal Market Data's triple-A scale.
U.S. Treasuries were weaker on Tuesday as investors around the world changed course and dumped bonds for equities. Shrugging off recent Brexit fears, most global stock markets rose and pushed U.S. shares higher as well.
The yield on the two-year Treasury rose to 0.67% from 0.66% on Monday as the 10-year Treasury yield gained to 1.49% from 1.43% and the yield on the 30-year Treasury bond increased to 2.22% from 2.15%.
In midday trading, the Dow Jones Industrial Average was up about 0.5%, the S&P 500 was about 0.6% higher and the Nasdaq was nearly 0.6% higher. U.K. equities fell by about 0.8%, while stocks in Germany increased 1.4% and in France gained 1.6%. Earlier in Asian trade, stocks in Japan rose 2.5% while China equities gained about 1.7%.
On Monday, the 10-year muni to Treasury ratio was calculated at 93.0% compared to 96.0% on Friday, while the 30-year muni to Treasury ratio stood at 91.2% versus 92.51%, according to MMD.
MSRB: Previous Session's Activity
The Municipal Securities Rulemaking Board reported 30,430 trades on Monday on volume of $5.78 billion.
Primary Market
Siebert Brandford Shank is holding the second day of a retail order period for the New York City Transitional Finance Authority's $800 million of tax-exempt future tax secured subordinate Fiscal 2017 Subseries A-1 bonds. The institutional pricing is set for Wednesday.
The issue was priced on Monday for retail to yield from 0.69% with 4% and 5% coupons in a split 2019 maturity to 2.43% with a 4% coupon in 2042; no retail orders were taken in the 2030-2034, 2039 or 2041 maturities. A 2018 maturity was offered as a sealed bid.
The bonds are rated Aa1 by Moody's Investors Service and triple-A by S&P Global Ratings and Fitch Ratings; all three agencies have a stable outlook on the credit.
The TFA on Wednesday will competitively sell two separate taxable offerings totaling $250 million, consisting of $186.91 million of Fiscal 2017 Series A Subseries A-2 future tax secured bonds and $63.91 million of Fiscal 2017 Series A Subseries A-3 future tax secured bonds.
Ramirez & Co. priced the State of New York Mortgage Agency's $123.43 million of homeowner mortgage revenue bonds for retail investors ahead of the institutional pricing on Wednesday.
The $100.34 million of Series 197 bonds, which are not subject to the alternative minimum tax, were priced at par to yield from 1.45% and 1.50% in a split 2022 maturity to 2.45% and 2.50% in a split 2029 maturity; a 2031 maturity was priced at par to yield 2.60%. A 2044 maturity was not offered to retail.
The $23.1 million of Series 198 AMT bonds were priced at par to yield from 1% and 1.10% in a split 2018 maturity to 1.75% in 2022. A split 2017 maturity was offered as sealed bids. The SONYMA deal is rated Aa1 by Moody's.
JPMorgan Securities priced the Massachusetts Port Authority's $231.57 million of revenue and revenue refunding bonds.
The $50.29 million of Series 2016A non-AMT revenue refunding bonds were priced to yield from 0.78% with a 4% coupon in 2019 to 2.18% with a 5% coupon in 2038. The 2017 and 2018 maturities were offered as sealed bids.
The $181.28 million of Series 2016B AMT revenue bonds were priced as 5s to yield 2.55% in 2043, as 3s to yield 3.11% in 2046 and as 4s to yield 2.93% in 2046. The deal is rated Aa2 by Moody's and AA by S&P and Fitch.
JPMorgan is also set to price the Massachusetts Port Authority's $223.04 million issue on Tuesday. The offering consists of $50.995 million of Series 2016A revenue refunding bonds not subject to the alternative minimum tax and $172.04 million of Series 2016B revenue bonds subject to the AMT. The deal is rated Aa2 by Moody's and AA by S&P and Fitch.
On Tuesday, JPMorgan Securities is expected to price the Louisville-Jefferson County Metropolitan Government, Ky.'s $538.05 million of Series 2016A health system revenue bonds for Norton Healthcare. The deal is rated A-minus by S&P and A by Fitch.
Ahead of the sale Fitch raised around $800 million in parity debt to A from A-minus based on the system's improving financial metrics and market share.
"Norton, headquartered in Louisville, operates five hospitals, seven outpatient centers, and 13 urgent care locations. Growth in patient volume is driving Norton to use bond proceeds for facilities expansion at its Women's and Children's hospitals and for a wide reaching energy initiative," Janney municipal credit analyst Eric Kazatsky wrote in a market comment on Monday. "Inpatient market share has grown to almost 51%, almost double its competition, while pediatric market share is 96%. Following challenging years in 2012-2013, Norton has improved margins, with ending fiscal 2015 operating margin at 4.9% and interim three month 2016 results of 5.8%; while liquidity has improved at $979 million, or 189 days cash on hand, liquidity is below national medians."
Since 2006, the Louisville-Jefferson County Metro Government Health System has issued about $2.6 billion of debt, with the largest issuance occurring in 2009 when it sold $482 million of securities.
In the competitive arena on Tuesday, Hillsborough County, Fla., sold $204.65 million of Series 2016 utility revenue bonds.
Wells Fargo Securities won the bonds with a true interest cost of 2.84%. The issue was priced to yield from 0.86% with a 1.5% coupon in 2020 to 2.86% with a 3% coupon in 2046.
The deal is rated triple-A by Moody's, AA-plus by S&P and triple-A by Fitch.
Prior to this sale, the county last competitively sold comparable bonds on Oct. 10, 2010, when Bank of America Merrill Lynch won $18.04 million of Series 2010A utility revenue bonds with a TIC of 2.09%.
BAML won the Miami-Dade County School District's $296 million of Series 2016 tax anticipation notes with a TIC of 0.48%. The TANs were priced as 5s to yield 0.47% in 2017. The deal is rated MIG1 by Moody's
Bond Buyer Visible Supply
The Bond Buyer's 30-day visible supply calendar increased $1.86 billion to $14.29 billion on Tuesday. The total is comprised of $4.65 billion of competitive sales and $9.64 billion of negotiated deals.
