Individual municipal buyers got a second chance to pick up some general obligation bonds from New York City on Tuesday while two Virginia issuers came to market with transportation and healthcare deals.
Treasuries strengthened as equitities took a late dive after President Donald Trump announced that further stimulus talks were off the table until after the election.
Municipals were trading weaker on the day, with yields on the AAA scales rising by as much as three basis points after an onslaught of new issues once again distracted the secondary to a degree.
Credit quality remains a focus for most investors as the last quarter of the year gets underway.
As the U.S. economy begins a recovery from its sharpest slump since World War II, credit conditions helped by central bank monetary stimulus are mostly favorable for many borrowers, S&P Global Ratings said in a report released Tuesday.
“Still, pockets of risk are growing. U.S. state and local governments are under budget pressures as revenues tumble and the pain could intensify unless federal legislators agree on another round of stimulus — with a deal proving elusive,” S&P said. “Premature austerity from Washington would draw out the timeframe for state and local governments to regain their fiscal balance, weighing on the U.S. economy (with states and locals accounting for about 11% of GDP).”
S&P said that many municipalities have already started cutting their budgets and may have to cut more without additional stimulus.
“This is crucial given that, in times of deep imbalances, governments often make choices that hurt their long-term credit stability, such as reducing pension contributions or deferring infrastructure investment,” S&P said.
“The threat of financial-market volatility has heightened as the U.S. election draws near — especially if the presidency is in dispute, as in 2000,” S&P said. “Moreover, if Republicans and Democrats continue to split power in Washington, the chance for another round of sweeping fiscal stimulus may disappear.”
Primary market
Siebert Williams Shank held a second day of retail orders on New York City’s (Aa2/AA/AA/NR) $1.04 billion of tax-exempt fixed-rate general obligation bonds. The deal will be priced for institutions on Wednesday.
The $900 million of Fiscal 2021 Series C GOs were priced for retail to yield from 0.43% with a 5% coupon in 2022 to 2.88% with a 2.75% coupon in 2044.
The $25.17 million of Fiscal 2008 Series J Subseries J-5 were priced as a remarketing as 4s to yield 1.17% in 2027 and 1.35% in 2028.
The $41. 03 million of Fiscal 2008 Series J Subseries J-6 GOs were priced as a remarketing as 4s to yield 0.54% in 2923, as 5s to yield 0.54% in 2023 and as4s to yield 0.63% in 2024.
The $54.065 million of Fiscal 2008 Series J Subseries J-10 GOs were priced as a remarketing as 4s to yield 0.99% in 2026 and as 5s to yield 1.17% in 2027.
The $19.695 million of Fiscal 2012 Series A Subseries A-3 GOs were priced as a remarketing as 4s to yield 2.24% in 2035.
BofA Securities priced and repriced the Hampton Roads Transportation Accountability Commission, Va.’s (Aa2/AA/NR/NR) $601.475 million of senior lien revenue bonds for the Hampton Roads transportation fund.
The bonds were repriced to yield from 0.64% with a 5% coupon in 2027 to 1.98% with a 4% coupon in 2040. A split 2045 maturity was repriced as 4s to yield 2.22% and as 5s to yield 2.02%; a split 2050 maturity was repriced as 4s to yield 2.31% and as 5s to yield 2.11%; a 2055 maturity was repriced as 4s to yield 2.50%; and a triple-split 2060 maturity was priced as 4s to yield 2.65%, as 5s to yield 2.45% and as 5.25s to yield 2.40%.
RBC Capital Markets priced the Virginia Small Business Financing Authority’s (NR/NR/A/NR) $381.35 million of Series 2020A revenue bonds for the Obligated Group of National Senior Campuses Inc.
The bonds were priced to yield from 0.82% with a 5% coupon in 2022 to 2.95% with a 4% coupon in 2040. A 2045 maturity was prices as 4s to yield 3.21% and a split 2051 maturity was priced as 4s to yield 3.26% and as 3.375s to yield 3.56%
Wells Fargo Securities priced and repriced the Ohio Water Development Authority’s (Aaa/AAA/NR/NR) $250 million of Series 2020B water pollution control loan fund refunding revenue bonds.
The deal was repriced to yield from 0.13% with a 5% coupon in 2021 to 1.77% with a 4% coupon in 1.77% in 2038.
In the competitive arena Tuesday, Somerville, Mass., (Aa1/AA+/NR/NR) sold $123.96 million of unlimited tax GO municipal purpose loan of 2020 bonds.
JPMorgan Securities won the deal with a true interest cost of 2.0586%. The deal was priced to yield from 0.17% with a 4.75% coupon in 2021 to 2.41% with a 2.375% in 2050.
HilltopSecurities was the financial advisor; Locke Lord was the bond counsel.
Howard County, Md., (Aaa/AAA/AAA//) sold $110.27 million of taxable refunding GOs in two offerings.
FHN Capital Markets won the $83.935 million of Series 2020E consolidated public improvement bonds with a TIC of 1.3955%.
Citigroup won the $26.335 million of Series 2020G metropolitan district bonds with a TIC of 2.1995%.
Davenport & Co. was the financial advisor; McKennon Shelton was the bond counsel.
Secondary market
Some notable trades from Tuesday include:
Austin, Texas ISD 5s of 2023 at 0.28%-0.23%. Maryland GOs 4s of 2024 at 0.26%-0.25%. Texas waters, 5s of 2031, at 1.17%. Cleveland, Texas, ISD 4s of 2050 traded at 1.98%-1.90%.
On Tuesday, high-grade municipals were weaker, according to final readings on Refinitiv MMD’s AAA benchmark scale. Yields were up two basis points in 2021 and 2022, to 0.14% and 0.15%, respectively. The yield on the 10-year muni rose three basis points 0.93% while the 30-year yield was up three basis points to 1.69%.
The 10-year muni-to-Treasury ratio was calculated at 124.7% while the 30-year muni-to-Treasury ratio stood at 110.5%, according to MMD
The ICE AAA municipal yield curve showed short maturities rise by one basis point, with the 2021 maturity at 0.13% and the 2022 maturity at 0.14%. The 10-year maturity was up three basis points to 0.89% and the 30-year was up three basis points to 1.69%. The 10-year muni-to-Treasury ratio was calculated at 125% while the 30-year muni-to-Treasury ratio stood at 109%, according to ICE.
The IHS Markit municipal analytics AAA curve showed yields at 0.15% in 2021 and 0.16% in 2022 while the 10-year muni was at 0.92% and the 30-year was at 1.68%.
The BVAL AAA curve showed the yield on the 2021 maturity unchanged at 0.11%, the 2022 maturity unchanged at 0.13%, the 10-year up two basis points to 0.89% and the 30-year up one basis point to 1.68%.
Treasuries were stronger as stock prices traded lower.
The three-month Treasury note was yielding 0.10%, the 10-year Treasury was yielding 0.75% and the 30-year Treasury was yielding 1.54%.
The Dow fell 1.20%, the S&P 500 dropped 1.20% and the Nasdaq lost 1.35%.
