Top quality municipal bonds finished weaker along with U.S. Treasuries on Tuesday, traders said, as the first big deals of the week came to market.
The yield on the 10-year benchmark muni general obligation rose three basis points to 1.55% from 1.52% on Monday, while the yield on the 30-year gained five basis points to 2.36% from 2.31%, according to the final read of Municipal Market Data's triple-A scale.
Reports that the European Central Bank is thinking about tapering off its quantitative easing sent European bond yields spiking, spilling over into the U.S. markets.
Treasuries were weaker in late trade. The yield on the two-year Treasury rose to 0.82% from 0.79% on Monday, the 10-year Treasury yield gained to 1.68% from 1.62% and the yield on the 30-year Treasury bond increased to 2.40% from 2.33%.
The 10-year muni to Treasury ratio was calculated at 92.2% on Tuesday compared to 93.7% on Monday, while the 30-year muni to Treasury ratio stood at 98.2% versus 98.9%, according to MMD.
Primary Market
Tuesday's action kicked off when Barclays Capital priced the Massachusetts School Building Authority's $604.3 million of Series 2016B senior dedicated sales tax bonds and Series 2016C senior dedicated sales tax refunding bonds for retail investors and then for institutions
For institutions, the $405 million of Series 2016B were priced to yield from 0.91% with 2% and 5% coupons in a split 2018 maturity to 3.13% with a 3% coupon and 2.51% with a 5% coupon in a split 2036 maturity; a 2041 maturity was priced as 5s to yield 2.61% and a split 2046 maturity was priced as 4s to yield 2.98% and as 5s to yield 2.68%. A 2017 maturity was offered as a sealed bid.
The $199.3 million of Series 2016C bonds were priced as 5s to yield 2.37% in 2033, as 4s to yield 2.72% and as 5s to yield 2.42% in a split 2034 maturity and as 4s to yield 2.77% in 2035.
The deal is rated Aa2 by Moody's Investors Service and AA-plus by S&P Global Ratings and Fitch Ratings.
Loop Capital Markets priced the California State Public Works Board's $527.54 million of Series 2016 C&D various projects lease revenue refunding bonds for retail investors ahead of the institutional pricing on Wednesday.
The $313.2 million of Series 2016C bonds were priced as 5s to yield from 1.09% in 2020 to 2.49% in 2034. The $214.34 million of Series 2016D bonds were priced to yield from 0.86% with a 3% coupon in 2017 to 2.74% with a 4% coupon and at par with a 3% coupon in a split 2034 maturity.
Loop Capital Markets replaced Wells Fargo Securities as lead manager on the deal, which was originally slated to be priced last week.
Other members of the selling group included Raymond James & Associates; Alamo Capital; Cabrera Capital Markets; Fidelity Capital Markets; FTN Financial Capital Markets; HilltopSecurities; Hutchinson, Shockey, Erley; Bank of America Merrill Lynch; Mischler Financial Group; Prager; RH Investment; Stern Brothers; and U.S. Bancorp Investments.
The bonds are rated A1 by Moody's and A-plus by S&P and Fitch; the issue carries stable outlooks from all three agencies.
Bank of America Merrill Lynch priced the Massachusetts Development Finance Agency's $203.11 million of Series 2016 BB-1, BB-2 and BB-3 revenue bonds for Boston University.
The $110.95 million of Series BB-1 bonds were priced as 4s to yield 3.21% and as 5s to yield 2.88% in a split 2046 maturity. The $53.4 million of Series BB-2 bonds were priced to yield from 2.27% with a 5% coupon in 2030 to 3.15% with a 4% coupon in 2040. The $38.77 million of Series BB-3 bonds were priced as 5s to yield from 1.84% in 2026 to 2.41% in 2029. The deal is rated A1 by Moody's and A-plus by S&P.
JPMorgan Securities priced the Arizona Board of Regents $181.03 million of Series 2016A system revenue and revenue refunding bonds and Series 2016B system revenue green bonds for the University of Arizona.
The $42.56 million of Series 2016A bonds were priced to yield from 0.86% with a 3% coupon in 2017 to 3.12% with a 3% coupon in 2036; a 2040 maturity was priced as 4s to yield 2.98%.
The $138.47 million of Series 2016B green bonds were priced to yield from 1.05% with a 4% coupon in 2020 to 2.60% with a 5% coupon in 2038; a split 2042 maturity was priced as 4s to yield 3.01% and as 5s to yield 2.71%; a split 2046 maturity was priced as 4s to yield 3.05% and as 5s to yield 2.75%. The deal is rated Aa2 by Moody's and AA-minus by S&P.
Citigroup priced the West Basin Municipal Water District, Calif.'s $112.99 million of Series 2016A refunding revenue bonds. The issue was priced to yield from 0.78% with a 2% coupon in 2017 to 2.43% with a 5% coupon in 2036. The deal is rated Aa2 by Moody's and AA-minus by S&P.
On Wednesday, the biggest deal of the week will be coming from the Massachusetts Development Finance Agency.
Goldman Sachs is set to price the DFA's $1.54 billion of Series 2016A revenue bonds for Harvard University. The deal is rated triple-A by Moody's and S&P.
Since 2006, the DFA has sold almost $16.5 billion of bonds, with the most issuance prior to this year occurring in 2001 when it sold $1.99 billion of bonds. The agency sold the least amount of debt in 2009 when it issued $616.7 million.
Also Wednesday, Morgan Stanley is expected to price the Tarrant County Cultural Education Facilities Finance Corp., Texas' $631.62 million of Series 2016A revenue bonds for the Texas Health Resources System.
In the competitive arena on Wednesday, Wisconsin is selling about $325 million of Series 2016D general obligation bonds. The last time the state competitively sold comparable bonds was on July 12 when Morgan Stanley won $83.98 million of Series 2016B GOs with a true interest cost of 0.99%.
Also in the Midwest, Minneapolis, Minn., is competitively selling $120 million of Series 2016 GO improvement and various purpose bonds on Wednesday. The deal is rated Aa2 by Moody's and triple-A by S&P and Fitch.
MSRB: Previous Session's Activity
The Municipal Securities Rulemaking Board reported 26,968 trades on Monday on volume of $12.88 billion.
