Top-quality municipal bonds weakened at mid-session, according to traders, as yields increased by as much as two basis points from record low levels.
In the primary, competitive bond sales from issuers in South Carolina and Florida dominated Thursday's supply slate.
Secondary Market
The yield on the 10-year benchmark muni general obligation rose by as much as two basis points from 1.29% on Wednesday, while the 30-year muni yield was as much as two basis points higher from its record low level of 1.93%, according to a midday read of Municipal Market Data's triple-A scale.
U.S. Treasuries were weaker on Thursday. The yield on the two-year Treasury rose to 0.59% from 0.58% on Wednesday. The 10-year Treasury yield gained to 1.39% from 1.37% on Wednesday while the yield on the 30-year Treasury bond was unchanged at 2.14%.
On Wednesday, the 10-year muni to Treasury ratio was calculated at 93.3% compared to 95.2% on Tuesday, while the 30-year muni to Treasury ratio stood at 89.7% versus 90.8%, according to MMD.
Primary Market
The South Carolina Transportation Infrastructure Bank competitively sold $204.02 million of Series 2016A revenue refunding bonds. Wells Fargo Securities won the bonds with a true interest cost of 2.66%.
The issue was priced to yield from 0.70% with a 5% coupon in 2017 to 2.95% with a 3% coupon in 2037. The deal is rated A1 by Moody's Investors Service and A by Fitch Ratings.
The S.C. TIB previously competitively sold comparable bonds on June 18, 2015, when Wells Fargo won $157.1 million of the Series 2015A revenue refunding bonds with a TIC of 2.498%.
Since 2007, S.C. TIB has issued about $1.7 billion of debt, with the largest issuance occurring in 2012 when it sold $691 million of securities. This deal marks the first time since 2009 and 2010 when it issued debt in back-to-back years. The S.C. TIB did not come to market at all in 2008, 2011, 2013 or 2014.
The South Carolina Transportation Infrastructure Bank Act was signed on June 26, 1997, to focus greater attention on larger transportation projects, and thereby allow the South Carolina Department of Transportation to devote resources to other projects, according to the S.C. TIB website.
The Florida Board of Education competitively sold $216.18 million of Series 2016D full faith and credit public education capital outlay refunding bonds.
Morgan Stanley won the issue with a TIC of 2.31%. The issue was priced to yield from 0.62% with a 5% coupon in 2018 to 2.63% with a 3% coupon in 2037.
The deal is rated Aa1 by Moody's and triple-A by S&P Global Ratings and Fitch.
In the negotiated sector, Wells Fargo is expected to price Wake Forest University's $175 million of Series 2016 educational facilities revenue and revenue refunding bonds.
Bond Buyer Visible Supply
The Bond Buyer's 30-day visible supply calendar increased $1.27 billion to $7.95 billion on Thursday. The total is comprised of $4.37 billion of competitive sales and $3.58 billion of negotiated deals.
MSRB: Previous Session's Activity
The Municipal Securities Rulemaking Board reported 39,022 trades on Wednesday on volume of $9.47 billion.
Tax-Exempt Money Market Funds See Outflows
Tax-exempt money market funds experienced outflows of $945.1 million, bringing total net assets to $193.96 billion in the week ended July 4, according to The Money Fund Report, a service of iMoneyNet.com. This followed an outflow of $7.56 million to $194.91 billion in the previous week.
The average, seven-day simple yield for the 285 weekly reporting tax-exempt funds was unchanged at 0.07%.
The total net assets of the 888 weekly reporting taxable money funds decreased $24.83 billion to $2.488 trillion in the week ended July 5, after an inflow of $25.59 billion to $2.513 trillion the week before.
The average, seven-day simple yield for the taxable money funds was unchanged at 0.12%.
Overall, the combined total net assets of the 1,173 weekly reporting money funds decreased $25.77 billion to $2.682 trillion in the period ended June 28, which followed an inflow of $18.02 billion to $2.708 trillion.
