It was a slow day in both the primary and secondary markets as participants were waiting for the Federal Open Market Committee's decision on monetary policy, which came in as expected: no change.
The Fed's median estimate continues to forecast two rate increases in 2016, though six officials see only one – as do most market participants.
Secondary Trading
U.S. Treasuries were mostly stronger at Wednesday's close. The yield on the two-year Treasury decreased to 0.68% from 0.72% on Tuesday, while the 10-year Treasury yield was lower to 1.58% from 1.61% and the yield on the 30-year Treasury bond was unchanged at 2.42%.
Top quality municipal bonds followed Treasuries after the Fed's announcement and finished stronger. The 30-year muni general obligation yield fell one basis point to 2.17%, setting a new record low after Tuesday's 2.18%, according to the final read of Municipal Market Data's triple-A scale.
The yield on 10-year benchmark muni declined one basis point to 1.47%, tying the all-time low set in 2012, from 1.48% on Tuesday.
The 10-year muni to Treasury ratio was calculated at 88.9% on Wednesday compared to 91.9% on Tuesday, while the 30-year muni to Treasury ratio stood at 88.1% versus 90.0%, according to MMD.
Primary Market
In the competitive arena on Wednesday, Frederick County, Md., sold $119 million of general obligation bonds in two separate transactions, including $85.405 million of Series 2016A GO public facilities bonds and $34.82 million of Series 2016B taxable GO public facilities refunding bonds. Citi won the larger sale with a true interest cost of 2.27%, while Raymond James won the other sale with a TIC of 2.53%. Both deals are rated triple-A by Moody's, S&P and Fitch.
The last of the week's supply will come on Thursday, including the deal everyone has been talking about: Illinois.
The state is putting up for competitive bid $550 million of its Series 2016 GOs. The bonds are now rated Baa2 by Moody's Investors Service and BBB-plus by S&P Global Ratings and Fitch Ratings. All three raters have negative outlooks on the credit.
Illinois last competitively sold GOs on Jan. 14, when Bank of America Merrill Lynch won $480 million Series of January 2016 GOs with a true interest cost of 3.9989%. It was the state's first sale after a 20-month hiatus, and the proceeds were to be used mostly for transportation projects. That issue was priced with a top yield of 4.27% in 2041, which was 161 basis points over the comparable maturity on MMD's triple-A scale.
Since 2006, Illinois has issued about $27.5 billion of debt, with the largest issuance occurring in 2010 when it sold $8.7 billion of securities. The Prairie State has sold more than $1 billion a year every year since 2006, except in 2007, 2008 and 2015. After staying out of the market all last year, it looks as though the state is back on track to reach the $1 billion plateau once again this year.
Also on Thursday, Citigroup is set to price the Peralta Community College District of Alameda County, Calif.'s $155 million of general obligation bonds. The deal is rated Aa3 by Moody's and triple-A by S&P.
Bank of America Merrill Lynch is expected to price the Dutchess County Local Development Corp., N.Y.'s $378.01 million of Series 2016B revenue and revenue refunding bonds for Health Quest Systems. The deal consists of $28.01 million of Series 2016A revenue refunding bonds and $350 million of Series 2016B revenue bonds. The issue is rated A3 by Moody's and A-minus by S&P.
In the short-term competitive arena, the New York Metropolitan Transportation Authority is selling $700 million of bond anticipation notes in two separate sales. The deals consist of $350 million of Series 2016A Subseries 2016A-1 dedicated tax BANs and $350 million of Series 2016A Subseries 2016A-2 dedicated tax BANs.
Bond Buyer Visible Supply
The Bond Buyer's 30-day visible supply calendar increased $466.4 million to $8.29 billion on Thursday. The total is comprised of $4.03 billion of competitive sales and $4.26 billion of negotiated deals.
