Municipal bond traders are keeping a wary eye on the Federal Reserve as it gathers for a two-day meeting to decide the course of interest rates.
Meanwhile, the states of Tennessee, Texas and Florida are set to come to market ahead of the Fed’s decision on Wednesday.
Primary Market
Morgan Stanley is set to price the state of Tennessee’s $384.28 million of Series 2015A general obligation bonds and Series 2015B refunding bonds for institutions after a one-day retail order period on Monday.
The $288 million of Series 2015A bonds were priced for retail to yield from 0.53% with a 4% coupon in 2017 to 2.91% with a 5% coupon in 2035; a 2016 maturity was offered as a sealed bid. The $96.28 million of Series 2015B bonds were not offered to retail.
The issue was rated triple-A by Moody’s Investors Service and Fitch Ratings and AA-plus by Standard & Poor’s.
Morgan Stanley is also expected to price the Marin County Healthcare District, Calif.’s $170 million issue on Tuesday. The bonds are rated Aa2 by Moody’s.
Jefferies is set to price the state of Texas’ $223 million of Series 2015D GOs and water financial assistance bonds on Tuesday. The issue is rated triple-A by Moody’s, S&P and Fitch.
Since 2005, the Lone Star state has issued about $4 billion of debt, with the most issuance occurring in 2011 and 2013 when it sold $599 million and $641 million respectively. The state sold the least amount of bonds in 2005 and 2014 when it issued $247 million and $150 million, respectively.
In the competitive arena, the state of Florida’s Board of Education will sell $230 million of its full faith and credit Series 2015F public education capital outlay refunding bonds on Tuesday. The bonds are rated Aa1 by Moody’s and triple-A by S&P and Fitch.
Most of the rest of the week’s issuance will take place on Thursday, after the FOMC statement on Wednesday afternoon.
Most economists expect the Fed will not raise interest rates at this week’s meeting, although there remains some question as to whether the Fed will hike in December.
Secondary Market
Treasury prices were higher on Tuesday, with the yield on the two-year Treasury slipping to 0.62% from 0.63% on Monday, while the 10-year yield fell to 2.03% from 2.06% and the 30-year yield decreased to 2.85% from 2.86%.
Prices of top-quality municipal bonds finished higher on Monday. The yield on the 10-year benchmark muni general obligation was one basis point weaker at 2.03% from 2.04% on Friday, while the yield on the 30-year GO was one basis point softer at 3.06% from 3.07%, according to the final read of Municipal Market Data's triple-A scale.
The 10-year muni to Treasury ratio was calculated on Monday at 98.6% versus 98.2% on Friday, while the 30-year muni to Treasury ratio stood at 106.7% compared to 106.1%, according to MMD.
MSRB Previous Session's Activity
The Municipal Securities Rulemaking Board reported 34,165 trades on Monday on volume of $5.18 billion.
Bond Buyer Visible Supply
The Bond Buyer's 30-day visible supply calendar rose $453 million to $8.87 billion on Tuesday. The total is comprised of $3.02 billion competitive sales and $5.86 billion of negotiated deals.
