Puerto Rico issues rallied after the central parties reached a deal concerning Puerto Rico Sales Tax Financing Corp. bonds that would lead to a more than 32% reduction in COFINA debt. The Puerto Rico Oversight Board, the government of Gov. Ricardo Rosselló, COFINA senior bondholders’ representatives, COFINA subordinate bondholders’ representatives, and bond insurers agreed to the deal.
In active trading on Thursday, the benchmark Commonwealth Series 2014A 8% general obligation bonds of 2035 were trading at a high of 52 cents on the dollar compared to a high of 44.812 cents on Wednesday and a high of 43.25 cents on Tuesday, according to the Municipal Securities Rulemaking Board’s EMMA website. Trading volume totaled $68.36 million in 34 trades compared to $30.73 million in 22 trades on Wednesday and $33.51 million in 21 trades on Tuesday.
The COFINA Series 2010C 5.25% first subordinate revenue bonds of 2041 were trading at a high of 53 cents on the dollar compared to a high of 41.625 cents on Wednesday and a high of 40.5 cents on Tuesday, according to EMMA. Trading volume totaled $14.185 million in 12 trades compared to $700,000 in 15 trades on Wednesday and $70,000 in five trades on Tuesday.
The COFINA Series 2010A 5.375% first subordinate revenue bonds of 2039 were trading at a high of 52.875 cents on the dollar compared to a high of 40.755 cents on Wednesday and a high of 41.25 cents on Tuesday, according to EMMA. Trading volume totaled $15.72 million in 11 trades compared to $60,000 in three trades on Wednesday and $695,000 in three trades on Tuesday.
The COFINA Series 2010A 5.5% first subordinate revenue bonds of 2042 were trading at a high of 52.75 cents on the dollar compared to a high of 41.1 cents on Wednesday and a high of 41.015 cents on Tuesday, according to EMMA. Trading volume totaled $22.44 million in 13 trades compared to $170,000 in two trades on Wednesday and $185,000 in five trades on Tuesday.
The COFINA Series 2011A-1 5% first subordinate revenue bonds of 2043 were trading at a high of 53 cents on the dollar compared to a high of 41.5 cents on Wednesday and a high of 37.5 cents on Tuesday, according to EMMA. Trading volume totaled $7.98 million in 14 trades compared to $1.47 million in 13 trades on Wednesday and $15,000 in three trades on Tuesday.
The COFINA Series 2009B 6.35% first subordinate revenue bonds of 2039 were trading at a high of 53 cents on the dollar compared to a high of 40.25 cents on Wednesday and a high of 40.255 cents on Tuesday, according to EMMA. Trading volume totaled $8.985 million in 11 trades compared to $120,000 in two trades on Wednesday and $280,000 in seven trades on Tuesday.
Municipal bonds were mixed on Thursday, according to a midday read of the MBIS benchmark scale. Benchmark muni yields fell seven basis points in the one-year maturity and fell less than a basis point in the two-to 15-year maturities, rose less than a basis point in the 18-year and 20- to 30-year maturities and remained unchanged in the 16- and 17-year and 19-year maturities.
High-grade munis were mixed, with yields calculated on MBIS’ AAA scale falling three basis points in the one-year maturity and falling less than a basis point in the five- to 10-year and 24- to 30-year maturities, rising less than a basis point in the two- to four-year and 12- to 21-year maturities and remaining unchanged in the 11-, 22- and 23-year maturities.
Municipals were stronger on Municipal Market Data’s AAA benchmark scale, which showed the yield on both the 10-year muni general obligation and the yield on the 30-year muni maturity decreasing by as much as one basis point.
Treasury bonds were stronger as stocks traded mixed.
On Wednesday, the 10-year muni-to-Treasury ratio was calculated at 83.8% while the 30-year muni-to-Treasury ratio stood at 98.7%, according to MMD. The muni-to-Treasury ratio compares the yield of tax-exempt municipal bonds with the yield of taxable U.S. Treasury with comparable maturities. If the muni/Treasury ratio is above 100%, munis are yielding more than Treasury; if it is below 100%, munis are yielding less.
Traders said strong demand followed new issues this week as many deals across the country received positive feedback — despite the summer doldrums and due to the anemic supply.
One deal included the Michigan Finance Authority issue, which will finance a portion of Wayne County’s new criminal justice center project. The tax-exempt fixed rate bonds mature over 30 years with an interest rate of 3.91%.
On Thursday, Goldman Sachs received the written award on the Finance Authority’s $288.625 million of Series 2018 senior lien distributable state aid revenue bonds for the Charter County of Wayne Criminal Justice Center.
“The market demand allowed us to price these bonds at a very good interest rate, which will help us keep our borrowing costs low,” Wayne County Chief Financial Officer Henry Dachowitz said in a release Wednesday. “We presented a very strong credit profile to the market.
The pricing of the bonds followed investor meetings in Boston, Chicago and New York, according to the CFO. The project will be financed through the authority’s intercept program, he noted in the release, which offers more security for investors by sending Michigan’s Distributable State Aid (revenue sharing) to a third-party trustee to service the debt.
Moody’s Investors Service has assigned an Aa3 rating to both the county’s 2018 bonds and the state’s intercept program. Annual debt service is expected to be about $14 million to $19 million, according to the release.
Bond Buyer 30-day visible supply at $8.82B
The Bond Buyer's 30-day visible supply calendar decreased $1.50 billion to $8.82 billion for Thursday. The total is comprised of $1.66 billion of competitive sales and $7.16 billion of negotiated deals.
Previous session's activity
The Municipal Securities Rulemaking Board reported 40,673 trades on Wednesday on volume of $15.698 billion.
New York, California and Texas were the states with the most trades, with the Empire State taking 13.387% of the market, the Golden State taking 13.218% and the Lone Star State taking 9.821%.
ICI: Long-term muni funds saw $164M inflow
Long-term tax-exempt municipal bond funds saw an inflow of $164 million in the week ended Aug. 1, the Investment Company Institute reported.
This followed an inflow of $600 million into the tax-exempt mutual funds in the week ended July 25 and inflows of $1.765 billion, $1.028 billion, $356 million, $525 million, $742 million, $326 million, $648 million, $661 million, and $185 million in the nine prior weeks.
Taxable bond funds saw an estimated inflow of $5.694 billion in the latest reporting week, after seeing an inflow of $3.817 billion in the previous week.
ICI said the total estimated inflows to long-term mutual funds and exchange-traded funds were $477 million for the week ended Aug. 1 after inflows of $3.834 billion in the prior week.
Tax-exempt money market funds saw outflows
Tax-exempt money market funds saw outflows of $1.33 billion, lowering total net assets to $130.16 billion in the week ended Aug. 6, according to The Money Fund Report, a service of iMoneyNet.com. This followed an outflow of $3.09 billion to $131.48 billion in the prior week.
The average, seven-day simple yield for the 201 weekly reporting tax-exempt funds rose to 0.80% from 0.58% the previous week.
The total net assets of the 832 weekly reporting taxable money funds rose $25.20 billion to $2.697 trillion in the week ended Aug. 7, after an outflow of $3.67 billion to $2.671 trillion the week before.
The average, seven-day simple yield for the taxable money funds was unchanged from 1.56% from the prior week.
Overall, the combined total net assets of the 1,033 weekly reporting money funds rose $23.87 billion to $2.827 trillion in the week ended Aug. 7, after outflows of $6.76 billion to $2.803 trillion in the prior week.
Treasury announces auction details
The Treasury Department announced these auctions:
- $26 billion of 364-day bills selling on Aug. 14;
- $45 billion of 182-day bills selling on Aug. 13; and
- $51 billion of 91-day bills selling on Aug. 13.
Gary Siegel contributed to this report.
Data appearing in this article from Municipal Bond Information Services, including the MBIS municipal bond index, is available on The Bond Buyer Data Workstation. Click here for a brief tour of the Workstation, or contact Ziad Saba at 212-803-6079 for more information.