Top-rated municipal bonds were weaker with Treasuries on Tuesday, according to traders, as the first big wave of supply hit the screens, just part of the over $11 billion in new issues slated for sale this week.
The 30-day visible supply calendar jumped to the highest in seven years, weighing on municipals along with economic uncertainties, traders said.
The yield on the 10-year benchmark muni general obligation rose five basis points to 1.57% on Tuesday from 1.52% on Monday, while the yield on the 30-year rose five basis points to 2.28% from 2.23%, according to the final read of Municipal Market Data's triple-A scale.
Treasuries were also weaker on Tuesday after a survey of global fund managers by the Bank of America showed investors raised their holdings in cash to the highest level in almost 15 years, according to Bloomberg. Meanwhile, MarketWatch cited comments from an Elliott Management hedge fund manager saying that investors should sell long-term bonds to prepare against the threat of a rise in inflation.
The yield on the two-year Treasury rose to 0.80% from 0.77% on Monday, the 10-year Treasury yield rose to 1.73% from 1.66% and the yield on the 30-year Treasury bond increased to 2.47% from 2.39%.
The 10-year muni to Treasury ratio was calculated at 90.6% on Tuesday compared to 91.1% on Monday, while the 30-year muni to Treasury ratio stood at 92.4% versus 93.1%, according to MMD.
Bond Buyer Visible Supply
The Bond Buyer's 30-day visible supply calendar increased $1.12 billion to $19.27 billion on Tuesday. The total is comprised of $4.13 billion of competitive sales and $15.13 billion of negotiated deals.
"The Bond Buyer's 30-day visible supply rose to $19.3 billion, the highest level in seven years," Alan Schankel, managing director, municipal strategy at Janney, wrote in a Tuesday market comment.
"Fortunately, demand remains strong, evidenced by the record persistence (49 straight weeks) and strength ($48 billion year to date) of inflows to municipal mutual funds," Schankel wrote.
MSRB: Previous Session's Activity
The Municipal Securities Rulemaking Board reported 30,688 trades on Monday on volume of $9.29 billion.
Primary Market
The New York City Transitional Finance Authority is hitting the market with a total of $1.05 billion in negotiated and competitive offerings this week.
On Tuesday, Ramirez & Co. held a second day for retail orders on the TFA's $800 million of tax-exempt Fiscal 2017 Series B Subseries B-1 future secured subordinate bonds. The deal will be priced for institutions on Wednesday.
Ramirez priced the issue for retail on Tuesday to yield from 0.85% with 4% and 5% coupons in a spilt 2019 maturity to approximately 3.014% with a 3% coupon in 2042. No retail orders were taken in the 2031, 2034 or 2036-2039 maturities. A 2018 maturity was offered as a sealed bid.
On Monday, the issue was priced for retail to yield from 0.84% with 4% and 5% coupons in a spilt 2019 maturity to 3% at par in 2042.
The deal is expected to be rated Aa1 by Moody's Investors Service and rated triple-A by S&P Global Ratings and Fitch Ratings.
The TFA will also offer two competitive sales of taxable bonds on Wednesday, consisting of $62.5 million of Fiscal 2017 Series B Subseries B-3 future secured subordinate bonds and $187.51 million of Fiscal 2017 Series B Subseries B-2 future secured subordinate bonds.
On Tuesday, Siebert Cisneros Shank priced Connecticut's $965.19 million of special tax obligation bonds and special tax obligation refunding bonds for transportation infrastructure purposes.
The $800 million of Series 2016A special tax obligation bonds were priced to yield from 0.99% with a 5% coupon in 2019 to 2.61% with a 5% coupon and 2.85% with a 4% coupon in a split 2036 maturity. The 2017 and 2018 maturities were offered as sealed bids.
The $165.19 million of Series 2016B special tax obligation refunding bonds were priced to yield from 0.99% with 2% and 5% coupons in a split 2019 maturity to 2.19% with a 5% coupon in 2028.
The deal is rated Aa3 by Moody's, AA by S&P and AA-minus by Fitch.
Goldman Sachs priced and repriced the Michigan Finance Authority's $850.49 million of Series 2016 hospital revenue refunding bonds for the Henry Ford Health System.
The issue was repriced to yield from 0.89% with a 5% coupon in 2017 to 2.90% with a 5% coupon in 2037; a 2041 maturity was priced as 5s to yield 2.92%, a 2042 maturity was priced as 3 1/4s to yield 3.49% and a 2046 maturity was priced as 4s to yield 3.43%. The deal is rated A3 by Moody's and A by S&P.
Goldman also priced the California Department of Water Resources' $567.86 million of taxable power supply revenue bonds on Tuesday.
The issue was priced at par to yield 1.713% in 2021 and 2% in 2022. The deal is rated Aa1 by Moody's, AA by S&P and AA-plus by Fitch.
Since 2008, the DWR has sold about $12.78 billion of debt, with the largest issuance occurring in 2010 when it sold about $4.9 billion. The DWR also sold more than $1 billion in 2008 and 2011. The lowest year of issuance came in 2013, when it sold $166 million.
Citi priced the New York Convention Center Development Corp.'s $420.21 million of hotel unit fee secured revenue bonds consisting of Series 2016A senior liens and Series 2016B subordinated liens.
The $193.10 million of Series 2016A bonds were priced as 5s to yield from 1.33% in 2023 to 2.38% in 2036. A split 2041 maturity was priced at par to yield 3% and as 5s to yield 2.53% and a split 2046 maturity was priced as 4s to yield 2.80% and as 5s to yield 2.55%. A 2056 maturity was not reoffered. The capital appreciation bonds were priced to yield from 3.25% in 2047 to 3.43% in 2056.
The $227.11 million of Series 2016B bonds were priced as 5s to yield from 0.86% in 2018 to 1.68% in 2024. A 2056 maturity was not reoffered. The BABs were priced to yield from 2.19% in 2025 to 3.63% in 2056.
The Series A bonds are rated Aa3 by Moody's while the Series B bonds are rated A2 by Moody's.
Morgan Stanley priced the Massachusetts Development Finance Agency's $177.35 million of Series 2016E bonds for the Boston Medical Center.
The issue was priced to yield from 1.09% with a 2% coupon in 2017 to 3.38% with a 4% coupon in 2038. The deal is rated Baa2 by Moody's and BBB by S&P.
Citi priced the Tennessee Housing Development Agency's $125 million of residential finance program bonds consisting of Issue 2016-2A subject to the alternative minimum tax and Issue 2016-2B non-AMT bonds.
The $24.62 million of Issue 2016-2A bonds were priced as Planned Amortization Class bonds as 3 1/2s to yield 1.95% in 2047 with an average life of 5 years. The $100.39 million of Issue 2016-2B bonds were priced at par to yield from 0.72% in 2017 to 2.90% and 2.95% in a split 2032 maturity; a 2036 maturity was priced at par to yield 3.10%, a 2041 maturity was priced at par to yield 3.25%, a 2046 maturity was priced at par to yield 3.35% and a 2047 maturity was priced as a PAC bond as 3 1/2s to yield 1.85% with an average life of 5 years. The deal was rated Aa1 by Moody's and AA-plus by S&P.
In the competitive arena on Tuesday, Paulding County, Ga., sold $150.43 million of Series 2016 water and sewerage revenue improvement and refunding bonds. Bank of America Merrill Lynch won the bonds with a true interest cost of 2.86%.
The issue was priced to yield from 0.87% with a 5% coupon in 2019 to 2.88% with a 3% coupon in 2037; the 2043 and 2048 maturities were priced at par to yield 3% and the 2050 maturity was priced as 3s to yield 3.05%. The deal is rated Aa3 by Moody's and AA by S&P.
The Louisville/Jefferson County Metro Government, Ky., sold $147.49 million of bonds in two separate offerings.
Citigroup won the $89.5 million of Series 2016 general obligation bonds for the City Center project with a TIC of 2.91%. The issue was priced to yield from 0.89% with a 5% coupon in 2019 to 2.98% with a 3% coupon in 2039; the 2041 maturity was priced at par to yield 3%, the 2045 maturity was priced as 3s to yield 3.03% and the 2047 maturity was priced as 3s to yield 3.05%.
JPMorgan Securities won the $57.99 million of Series 2016A GOs with a TIC of 1.81%. Both deals are rated Aa1 by Moody's, AA-plus by S&P and AAA by Fitch.
