Texas and taxables fill buyers' plates as market bulks up ahead of FOMC meeting

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A bounty of municipal bonds priced into a falling-yield environment on Tuesday.

Issuers and buyers alike kept one eye on the Federal Open Market Committee, which began its two-day monetary policy meeting on Tuesday. While the FOMC isn't expected to make any rate changes, participants will be watching its release of economic projections and the virtual press conference held by Chair Jerome Powell after the meeting ends Wednesday afternoon.

"The name of the game [Tuesday] really has been new-issues stealing the focus from the secondary" once again, said Peter Franks of Refinitiv MMD. "Lots of variety to choose from as far as names and credit quality. AAA/AAA Univ Mich, Aa2/Aaa So Cal Met Wtr, Aa3/Aa) Ft Worth TX, (AAA/AAA) Prince Georges County, Maryland. "The negotiated loans were bumped pretty well like Prince Georges Couny out longer by 4-5 basis points for example. Up front Wakes and Tennessee were a customer bid-wanted that were a bit soft compared to usual and customary perhaps due to all the focus on the primary."

Traders will be looking closely at whether the Fed will set target yields, possibly as early as September, for certain U.S. Treasury securities as part of its quantitative easing policy.

Primary market
BofA Securities priced the Regents of the University Of Michigan’s (Aaa/AAA/NR/NR) $986.255 million of general revenue bonds consisting of $850.025 million of taxables and $136.23 million of tax-exempts.

The taxable were priced at par to yield 1.004% in 2025, 1.372% in 2027, 1.672% in 2030, 2.437% in 2040 and 2.562% in 2050.

The exempts were priced to yield from 0.29% with a 5% coupon in 2024 to 1.81% with a 4% coupon in 2040. A 2045 term was priced to yield 1.95% with a 4% coupon and a 2050 term was priced to yield 1.83% with a 5% coupon.

JPMorgan Securities priced Dallas, Texas’ (NR/AAA/AA+/NR) $661.1 million of waterworks and sewer system revenue refunding bonds, consisting of $296.855 million of tax-exempts and $364.24 million of taxables.

The exempts were repriced to yield from 0.17% with a 5% coupon in October 2020 to 1.84% with a 4% coupon in 2040; a 2045 term bond was priced to yield 1.84% with a 5% coupon and a 2049 term was priced to yield 2.06% with a 4% coupon.

The exempts had been tentatively priced to yield from 0.20% with a 5% coupon in October 2020 to 1.94% with a 4% coupon in 2040; a 2045 term bond was priced to yield 1.90% with a 5% coupon and a 2049 term was priced to yield 2.17% with a 4% coupon.

The taxables were priced to yield from 15 basis points above the comparable Treasury security in 2020 to 120 basis points above in 2040 and 125 basis points over in 2042.

Since 2010, Dallas has sold over $5 billion of debt, with the most issuance occurring in 2010 when it offered $837 million of securities.

In the competitive arena Tuesday, the state of Texas sold $162.205 million of general obligation bonds subject to the alternative minimum tax in two offerings.

Mesirow Financial won the $88.865 million of college student loan GOs with a true interest cost of 2.2532%.

BofA won the $73.34 million of college loan refunding GOs with a TIC of 1.4209%.

Hilltop Securities is the financial advisor; McCall Parkhurst and the State Attorney General are the bond counsel.

Fort Worth, Texas, (Aa3/AA/AA/AA+) sold $152.515 million of GO refunding and improvement bonds and $25.23 million of tax notes.

BofA won the bonds with a TIC of 1.6863% and JPMorgan won the notes with a TIC of 0.6335%.

BofA priced the bonds to yield from 0.23% with a 3% coupon in 2021 to 2.50% at par in 2040.

Hilltop Securities and Estrada Hinojosa are the financial advisors; McCall Parkhurst and Kelly Hart are the bond counsel.

Ft. Worth will come to market again on Wednesday when it sells $169.18 million of revenue bonds.

Wells Fargo Securities priced and repriced the Metropolitan Water District of Southern California’s (Aa1/AAA/NR/NR) $267.995 million of water revenue refunding bonds to lower yields by as much as 10 basis points.

The deal was repriced with 5% coupons to yield from 0.10% in 2021 to 0.38% in 2026, from 0.79% in 2030 to 1.12% in 2033 and from 1.40% in 2037 to 1.53% in 2040.

The deal was priced with 5% coupons to yield from 0.14% in 2021 to 0.48% in 2026, from 0.87% in 2030 to 1.23% in 2033 and from 1.44% in 2037 to 1.57% in 2040.

BofA Securities priced and repriced Prince George's County, Md.’s (Aaa/AAA/AAA/NR) $316.51 million of consolidated public improvement GOs and refunding GOs to lower yields in the Series A tier.

The Series A GOs were repriced with 5% coupons to yield from 0.17% in 2021 to 1.56% in 2040; the Series A GOs had been tentatively priced with 5% coupons to yield from 0.19% in 2021 to 1.61% in 2040.

The Series B refunding GOs were priced with 5% coupons to yield from 0.47% in 2025 to 1.22% in 2032.

JPMorgan priced the Clark County School District, Nev.’s (A2:A1/AA:A+/NR/NR) $200 million of limited tax GO building bonds. The deal was insured by Assured Guaranty Municipal.

The bonds were priced to yield from 0.67% with a 3% coupon to 2.35% with a 4% coupon in 2040.

Barclays Capital priced Massachusetts’ (Aa1/AA/AA+/NR) $177.435 million of GO multi-modal refunding bonds.

The deal was priced as a 2044 bullet maturity with a 2023 mandatory tender date to yield 0.50% with a 5% coupon.

Ventura County, Calif., (MIG1/SP1+/NR/NR) sold $125 million of tax and revenue anticipation notes. Goldman Sachs won the notes with a TIC of 0.1998%

KNN Public Finance is the financial advisor on the TRANs sale while Norton Rose is the bond counsel.

Secondary market
In trading, San Antonio, Texas shorts, 5s of 2021, traded at 0.21%-0.22%. Houston, ISD 3s of 2022 were at 0.23%-0.21%. Wake County, North Carolina GOs, 5s of 2022, were at 0.23%. San Francisco City and County GOs, 5s of 2023, at 0.25%. Maryland GOs, 5s of 2025, at 0.42%-0.41%

University of Texas 5s of 2028 traded at 0.85%-0.84%. Original yield: 0.87%.

New York City TFAs, 5s of 2029, at 1.115%-1.16%, a remarkable 38 basis point turn from the original of `1.54% when the new issue was priced on May 11, a month ago.

University of Texas 10-years hovered around 1.00%-0.95%, keeping in line with the sub-1.00% the 10-year has shown.

Purdue University 5s of 2035 were at 1.40% (Original yield: 1`.80%).

Fairfax County, Virginia, 5s of 2037, landed at 1.37%.

On MMD’s AAA benchmark scale, the yield on the 2021 and 2022 maturities rose two basis points to 0.18% and 0.21%, respectively while the 2023 maturity was flat at 0.23%. The yield on the 10-year GO fell one basis point to 0.88% while the 30-year declined two basis points to 1.68%.

The 10-year muni-to-Treasury ratio was calculated at 106.2% while the 30-year muni-to-Treasury ratio stood at 106.1%, according to MMD.

The ICE AAA municipal yield curve also showed yields unchanged in the 2021-2023 maturities, which yielded 0.170%, 0.191% and 0.247%, respectively. Out longer the yield on the 10-year fell two basis points to 0.854% while the 30-year dropped three basis points to 1.673%.

ICE reported the 10-year muni-to-Treasury ratio stood at 105% while the 30-year ratio was at 105%.

“Investment-grade munis are slightly stronger today in light trading as the market awaits the conclusion of the Fed meeting tomorrow,” ICE Data Services said in a market comment Tuesday. “High-yield bonds continue to firm in light trading. Taxable yields are keeping pace with Treasuries.”

The IHS Markit municipal analytics AAA curve also showed yields falling, with the 2021 maturity at 0.17%, the 2022 maturity at 0.22% and the 2023 maturity at 0.25% while the 10-year muni was at 0.87% and the 30-year stood at 1.66%.

The BVAL curve showed the 2021 maturity rose one basis piont to at 0.12% and the 2022 also rose one basis point at 0.18%. BVAL calculated the 10-year muni fell one basis point to 0.84% while the 30-year fell two basis pionts to t0 1.71%.

Munis were little changed on the MBIS benchmark scale.

Treasuries were stronger as stocks traded mixed.

The three-month Treasury note was yielding 0.193%, the 10-year Treasury was yielding 0.824% and the 30-year Treasury was yielding 1.585%.

The Dow dropped 0.86%, the S&P 500 decreased 0.57% and the Nasdaq gained 0.52%.

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