Top-shelf municipal bonds finished steady to slightly weaker on Wednesday, traders said, as a second wave of new issuance swept over the market, led by an upsized deal from the New York Metropolitan Transportation Authority.
Primary Market
Wells Fargo Securities priced and restructured the New York Metropolitan Transportation Authority's significantly upsized $863.86 million of Series 2016C transportation revenue and transportation revenue refunding bonds for institutions after holding a one-day retail order period. The $838.31 deal priced in the morning and added a refunding component for institutional investors; in the afternoon a second component was added at the repricing.
The $534.2 million of Series 2016C-1 transportation revenue bonds were priced to yield from 0.60% with a 3% coupon in 2017 to 2.52% with a 5% coupon in 2039; a 2041 maturity was priced as 4s to yield 2.77%, a triple-split 2046 maturity was priced as 5s to yield 2.58%, as 4s to yield 2.82% and as 3s to yield 3.11%; a split 2056 maturity was priced as 5s to yield 2.79% and as 5 1/4s to yield 2.71%.
The $56.12 million of Series 2016C-2a fixed-rate transportation revenue refunding bonds were priced at par to yield 3% and as 4s to yield 2.74% in a split 2038 maturity.
The $273.54 million of Series 2016C-2b transportation revenue refunding tender option bonds were priced as 5s to yield 1.16% in 2034 with a mandatory put in 2020.
"The MTA deal was upsized to include a refunding portion which they ended up turning into a 'soft put' bond 2034 maturity with the 2020 put. The original deal was mostly done at original spreads with just a few basis points cuts in the terms," said one New York trader.
On Tuesday, the $529.61 million transportation revenue bonds were priced for retail to yield from 0.86% with a 4% coupon in 2019 to 2.50% with a 5% coupon in 2039; a 2041 maturity was priced as 4s to yield 2.76%, a 2046 maturity was priced as 5s to yield 2.56% and a 2056 maturity was priced as 5s to yield 2.79%.
The deal is rated A1 by Moody's Investors Service, AA-minus by S&P Global Ratings, A by Fitch Ratings and AA-plus by Kroll Bond Rating Agency.
Morgan Stanley priced the State Building Authority of Michigan's $666.13 million of Series 2016 revenue and revenue refunding bonds.
The bonds were priced to yield from 0.76% and 0.80% with 5% coupons in split 2018 maturity to 2.55%, 2.80% and 2.642% with 5%, 4%, and 2.50% coupons in a triple-split 2036 maturity. A term bond in 2041 was priced as 5s to yield 2.61%, a term bond in 2046 was priced as 5s to yield 2.66% and a term bond in 2051 was priced as 5s to yield 2.76%.
The deal is rated Aa2 by Moody's, A-plus by S&P and AA-minus by Fitch.
"The Michigan SBA deal was heavily oversubscribed," the New York trader said, adding that "yields were bumped eight basis points 12 years on in on the curve."
Since 2006, the Michigan SBA has issued about $3.7 billion of debt, with the largest issuance occurring in 2015 when it sold $989 million of securities. This sale will mark the first time the Michigan SBA has issued in back-to-back years since 2008 and 2009.
Goldman Sachs priced the New York City Trust for Cultural Resources' $280.56 million of Series 2016-One-E revenue bonds for the Museum of Modern Art.
The deal was priced as 4s to yield 1.26% in 2023 and as 4s to yield from 1.51% in 2025 to 2.14% in 2031. The MoMA bonds are rated Aa2 by Moody's and AA by S&P.
Morgan Stanley priced the Louisiana Citizens Property Insurance Corp.'s $217.42 million tax-exempt and taxable bonds.
The $160.66 million of Series 2016A assessment revenue refunding bonds were priced as 5s to yield from 1.62% in 2023 to 2.01% in 2026. The $56.76 million of Series 2016B taxable assessment revenue refunding bonds were priced at par to yield 2.64% in 2024 and 2.74% in 2025. The deal is rated A1 by Moody's and A by S&P.
Bank of America Merrill Lynch priced the Ohio Water Development Authority's $135 million of Series 2016 drinking water assistance fund revenue bonds.
The issue was priced to yield from 0.87% with a 4% coupon in 2020 to 2.20% with a 5% coupon in 2037. The deal is rated triple-A by Moody's, S&P and Fitch.
BAML also priced the Las Vegas Convention and Visitors Authority, Nev.'s $100.71 million of Series 2016C revenue refunding bonds.
The issue was priced to yield from 1.20% with a 5% coupon in 2021 to 3.21% with a 3% coupon in 2038; a 2041 maturity was priced as 4s to yield 3.06% and a 2046 maturity was priced as 4s to yield 3.11%. The deal is rated A1 by Moody's and A-plus by S&P.
Secondary Market
The yield on the 10-year benchmark muni general obligation was unchanged from 1.45% on Tuesday, while the yield on the 30-year muni rose one basis point to 2.12% from 2.11%, according to the final read of Municipal Market Data's triple-A scale.
U.S. Treasuries gave back the previous day's gains and turned weaker on Wednesday, analysts said, due to a story in the Wall Street Journal hinting that the Federal Reserve would move earlier, rather than later, this year to raise interest rates.
The yield on the two-year Treasury rose to 0.71% from 0.69% on Tuesday as the 10-year Treasury yield gained to 1.58% from 1.55% and the yield on the 30-year Treasury bond increased to 2.30% from 2.27%.
"The Fed was providing an early glimpse of the FOMC meeting scheduled for next week in the Wall Street Journal," MMD Senior Market Analyst Randy Smolik wrote in a market comment. "The article relayed how encouraged Fed officials were in recent economic releases as well as their assessment that Brexit may not have much impact on the U.S. economy. The Fed was likely to raise rates at least once this year and it could occur as early as September."
The 10-year muni to Treasury ratio was calculated at 91.9% on Wednesday compared to 93.2% on Tuesday, while the 30-year muni to Treasury ratio stood at 92.4% versus 92.8%, according to MMD.
MSRB: Previous Session's Activity
The Municipal Securities Rulemaking Board reported 36,043 trades on Tuesday on volume of $9.44 billion.
