Top-quality municipal bonds were substantially weaker at midday, according to traders, as yields rose as much as seven basis points in spots. Treasury bonds were also weaker while stocks slumped.
In the primary, the N.Y. MTA postponed its $700 million green bond deal while Goldman Sachs priced the Los Angeles Department of Water & Power’s bonds.
Bonds were hit by a combination of global central bank comments, strong Eurozone economic data, and rising expectations of another interest rate hike by the Federal Reserve this year.
The yield on the 10-year benchmark muni general obligation rose five to seven basis points from 1.92% on Wednesday, while the 30-year GO yield increased three to five basis points from 2.74%, according to a read of Municipal Market Data's triple-A scale.
Treasuries were also weaker on Thursday. The yield on the two-year Treasury rose to 1.37% from 1.35% on Wednesday, the 10-year Treasury yield gained to 2.27% from 2.22% and the yield on the 30-year Treasury bond increased to 2.82% from 2.77%.
U.S. equities were lower at mid-session, with the Dow Jones Industrial Average off about 0.5%, the S&P 500 down around 0.7% and the Nasdaq down 1.5%.
Recent hawkish comments from European central bank officials added to traders' views there would be an end to accommodative monetary policies sooner rather than later.
And, according to the CME Group's FedWatch tool, the Fed funds futures now show a 55% chance of another Fed hike by the end of 2017, the highest the odds have been in seven weeks.
On Wednesday, the 10-year muni to Treasury ratio was calculated at 86.4%, compared with 85.6% on Monday, while the 30-year muni to Treasury ratio stood at 98.7% versus 98.5%, according to MMD.
MSRB: Previous session's activity
The Municipal Securities Rulemaking Board reported 45,098 trades on Wednesday on volume of $12.58 billion.
Goldman Sachs priced the Los Angeles Department of Water & Power’s $375 million of Series 2017C power system revenue bonds.
The bonds were priced to yield from 1.25% with a 5% coupon in 2022 to 2.92% with a 5% coupon in 2038. A term bond in 2042 was priced to yield 2.98% with a 5% coupon and a term bond in 2047 was priced to yield 3.04% with a 5% coupon.
The deal is rated Aa2 by Moody’s Investors Service and AA-minus by S&P Global Ratings and Fitch Ratings.
The New York Metropolitan Transportation Authority’s $744.95 million of climate bond certified Series 2017B transportation revenue green bonds was postponed on Thursday.
The deal had been priced for retail investors on Wednesday. The $444.95 million of subseries 2017B-1 bonds were priced for retail to yield from 0.97% with a 3% coupon in 2018 to 3.03% with a 5% coupon in 2038. A 2042 maturity was priced as 4s to yield 3.44% and a 2047 maturity was priced as 5s to yield 3.15%. The 2052 and 2057 maturities were not offered to retail. The $300 million of subseries 2017B-2 bonds were priced to yield from 1.58% with 3% and 5% coupons in a split 2022 maturity to 2.44% with a 5% coupon in 2028.
The deal is rated A1 by Moody’s, AA-minus by S&P and Fitch and AA-plus by Kroll Bond Rating Agency.
The deal was increased from an expected $500 million. Last week, the MTA competitively sold $500 million of transportation revenue bond anticipation notes in a sale that was decreased from the $700 million originally planned.
Since 2007, the N.Y. MTA has sold roughly $32.59 billion of securities, with the highest issuance in 2012 when it sold roughly $6.69 billion. The issuance was lowest in 2007 when it sold $1.27 billion.
Raymond James & Associates priced the Comal Independent School District, Texas’ $227.16 million of Series 2017 unlimited tax school building bonds.
The issue was priced to yield from 1.04% with a 5% coupon in 2019 to 2.85% with a 5% coupon in 2039; a 2042 maturity was priced as 5s to yield 2.91%.
The deal, backed by the Permanent School Fund guarantee program, is rated triple-A by Moody’s and Fitch.
Bond Buyer reports 30-day visible supply
The Bond Buyer's 30-day visible supply calendar decreased $3.76 billion to $3.48 billion on Thursday. The total is comprised of $1.15 billion of competitive sales and $2.33 billion of negotiated deals.
Tax-exempt money market funds see outflows
Tax-exempt money market funds experienced outflows of $549.1 million, bringing total net assets to $129.16 billion in the week ended June 26, according to The Money Fund Report, a service of iMoneyNet.com.
This followed an outflow of $41.9 million to $129.71 billion in the previous week.
The average, seven-day simple yield for the 232 weekly reporting tax-exempt funds jumped to 0.39% from 0.34% in the previous week.
The total net assets of the 850 weekly reporting taxable money funds increased $10.56 billion to $2.467 trillion in the week ended June 27, after an outflow of $39.28 billion to $2.457 trillion the week before.
The average, seven-day simple yield for the taxable money funds increased to 0.60% from 0.57% in the prior week.
Overall, the combined total net assets of the 1,082 weekly reporting money funds increased $10.01 billion to $2.596 trillion in the week ended June 27, after outflows of $39.24 billion to $2.586 trillion in the prior week.