Puerto Rico bonds trade up as munis weaken; LCRA deal sells
Puerto Rico bonds traded up Wednesday after reports of settlement among bondholders, as the broader municipal bond market turned mostly weaker along with Treasuries.
Buyers saw a bunch of new deals come to market, led by the Lower Colorado River Authority’s $292 million of refunding revenue bonds.
Puerto Rico bonds trade higher
Bondholders representatives on about $18 billion each of Puerto Rico general obligation and the Puerto Rico Sales Tax Financing Corp. bonds have reached an agreement to settle a dispute over sales tax revenue, according to published reports.
In active trading on Wednesday, the benchmark Puerto Rico Commonwealth Series 2014 GO 8s of 2035 were trading at a high price of 42 cents on the dollar compared to 41.125 cents on Tuesday, according to the MSRB’s EMMA website. Volume totaled $34.37 million in 21 trades compared to $690,000 in six trades on Tuesday.
The COFINA Series 2007A revenue 5.25s of 2057 were trading at a high price of 76.25 cents on the dollar compared to 68 cents on Tuesday, according to the EMMA website. Volume totaled $62.19 million in 25 trades compared to $10,000 in two trades on Tuesday.
The COFINA Series 2007B revenue 6.05s of 2036 traded at a high price of 77 cents on the dollar compared to 69 cents on Tuesday, according to the EMMA website. Volume totaled $22.52 million in 30 trades compared to $20.02 million in 17 trades on Tuesday.
The COFINA Series 2011C current interest revenue 5.25s of 2040 traded at a high price of 75.76 cents on the dollar compared to 67.633 cents on Tuesday, according to the EMMA website. Volume totaled $28.19 million in 13 trades compared to $670,000 in six trades on Tuesday.
The COFINA Series 2009A revenue 5.75s of 2037 traded at a high price of 35 cents on the dollar compared to 29.875 cents on Tuesday, according to the EMMA website. Volume totaled $820,000 in 10 trades compared to $260,000 in two trades on Tuesday.
Constructive yet cautious is how one New York municipal trader described the tone in the municipal market on Wednesday afternoon.
"It’s a bifurcated market,” the trader said, adding that the secondary market traded off and gave investors pause, yet the new issue market had eager buyers.
The California market in particular is seeing strong demand, despite high prices, he said. “It’s a high tax state, but some of the levels being pushed on the front end of the Cal market are staggering," he said. "It’s seeing extremely good support.”
The lack of supply so far this year has otherwise left investors seeking paper. The imminent Spring reinvestment season is hampering the already low issuance, according to the trader, who said the $68 billion in net cash flow expected in the next three months due to large coupon reinvestment exceeds anticipated issuance.
“That amount wants to be put to work, but a lot of the money is constructive — buying on the front end of the curve — which is why we are seeing some steepness.”
Overall, he said the tone is “fairly good, but again cautious is the main word …. Everyone is still concerned about rising rates.” It makes sense that investors want to shorten their duration parameters and be more cautious “until there is more clarity as to the next direction of interest rates,” he said
Municipal bonds were mostly weaker on Wednesday, according to a late read of the MBIS benchmark scale. Benchmark muni yields rose as much as one basis point in the one- to three-year and 10- to 30-year maturities and fell by as much as one basis point in the four- to nine-year maturities.
High-grade munis were mostly weaker, with yields calculated on MBIS’ AAA scale rising as much as one basis point in the one- to three-year and 11- to 20-year maturities and falling as much as one basis point in the four- to 10-year maturities.
Municipals were weaker on Municipal Market Data’s AAA benchmark scale, which showed yields rising two basis point higher in the 10-year general obligation muni and gaining four basis points in the 30-year muni maturity.
Treasury bonds were weaker as stock prices traded higher.
On Wednesday, the 10-year muni-to-Treasury ratio was calculated at 82.7% while the 30-year muni-to-Treasury ratio stood at 95.2%, 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.
Previous session's activity
The Municipal Securities Rulemaking Board reported 43,356 trades on Tuesday on volume of $14.07 billion.
California, New York and Texas were the states with the most trades, with the Golden State taking 14.204% of the market, the Empire State taking 11.536% and the Lone Star State taking 10.074%.
Bank of America Merrill Lynch priced the Lower Colorado River Authority, Texas’ $292.15 million of Series 2018 transportation contract refunding revenue bonds for the LCRA Transmission Services Corp. project.
Citigroup priced the Sacramento Municipal Utility District, Calif.’s $166.59 million of Series 2018F electric revenue refunding bonds.
JPMorgan Securities priced the Tri-County Metropolitan Transportation District of Oregon’s $148.25 million of Series 2018A senior lien payroll tax revenue bonds.
Notes also feature prominently this week.
Goldman Sachs received the official award on Los Angeles County’s $700 million of 2018-2019 tax and revenue anticipation notes.
Stifel is set to price Riverside County, Calif.’s $340 million of 2018 tax and revenue anticipation notes. Raymond James & Associates is expected to price the Houston Independent School District, Texas’ $200 million of maintenance tax notes.
In the competitive arena, Arlington County, Va., sold $153.555 million of Series 2018 general obligation public improvement bonds. Wells Fargo Securities won the bonds with a true interest cost of 2.99%.
Since 2008, the county has sold about $1.69 billion of securities, with the most issuance occurring in 2012 when it sold $219 million and the least in 2015 when it sold $77 million.
Loudoun County, Va., sold $148.275 million of Series 2018A general obligation public improvement bonds. Citi won the bonds with a TIC of 2.9802%.
Evergreen School District No. 114, Wash., sold $114.7 million of unlimited tax Series 2018 GOs under the Washington state school district credit enhancement program. Citi won the bonds with a TIC of 3.192%.
The Illinois Regional Transportation Authority sold $134.025 million of Series 2018B GOs. Morgan Stanley won the bonds with a TIC of 3.822%.
Wednesday’s bond sales
Click here for the Sacramento deal
Click here for the RTA pricing
Click here for the Arlington County deal
Click here for the Evergreen deal
Click here for the Greeneville pricing
Bond Buyer 30-day visible supply at $7.91B
The Bond Buyer's 30-day visible supply calendar decreased $2.42 billion to $7.91 billion on Thursday. The total is comprised of $4.38 billion of competitive sales and $3.53 billion of negotiated deals.
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 Vanessa Kim at 212-803-8474 for more information.