Municipal bond traders are set to see more supply hit the market on Wednesday as long-term muni yields sit at record low levels.
Secondary Market
U.S. Treasuries were steady on Wednesday. The yield on the two-year Treasury was unchanged from 0.78% on Tuesday, while the 10-year Treasury yield was flat at 1.71% and the yield on the 30-year Treasury bond was unchanged from 2.53%.
On Tuesday, top-shelf municipal bonds ended stronger, with the yield on the 30-year municipal falling into record low territory.
The yield on the 30-year general obligation fell four basis points to a record low of 2.36% from 2.40% on Monday, according to the final read of Municipal Market Data's triple-A scale. The previous low for the 30-year was hit on May 17 when it dropped to 2.39%.
The yield on 10-year benchmark muni general obligation fell one basis point to 1.61% from 1.62% on Monday, according to MMD.
The 10-year muni to Treasury ratio was calculated at 94.0% on Tuesday compared to 94.1% on Monday, while the 30-year muni to Treasury ratio stood at 93.1% versus 94.3%, according to MMD.
MMD's Senior Market Strategist Daniel Berger said the muni market was encouraged by Fed Chair Janet Yellen's Monday comments which it interpreted as possibly pushing off rate hikes until later in the year.
"This meant that the muni market's five-/30-year triple-A GO slope flattened further and hit its 12 month low of +131 basis points," Berger said. "This slope was last at this level in January 2008. However, it is unlikely to reach its all-time low of +41 basis points."
MSRB: Previous Session's Activity
The Municipal Securities Rulemaking Board reported 37,404 trades on Tuesday on volume of $10.18 billion.
Primary Market
Primary action will continue in the competitive arena on Wednesday when Maryland competitively sells $1.04 billion of bonds.
The state will offer State and Local Facilities Loan of 2016, First Series general obligation bonds.
The deal is rated triple-A by Moody's Investors Service, S&P Global Ratings and Fitch Ratings.
Also Wednesday, Seattle, Wash., will sell $165 million of Series 2016 drainage and wastewater system improvement and refunding revenue bonds.
Additionally, Clark County, Nev., will sell $108 million of Series 2016 highway revenue refunding bonds. The issue is rated Aa3 by Moody's and AA-minus by S&P.
And the Fayetteville Public Work Commission, N.C., will offer about $112 million of Series 2016 revenue bonds. The deal is rated Aa2 by Moody's and AA by S&P and Fitch.
In the negotiated sector on Wednesday, Barclays Capital priced the Lower Colorado River Authority, Texas' $188.39 million of Series 2016 transmission contract refunding revenue bonds for the LCRA Transmission Service Corp. Project.
The issue was priced to yield from 0.71% with a 3% coupon in 2017 to 2.99% with a 4% coupon in 2035; a 2037 maturity was priced as 3s to yield 3.21%, a 2041 maturity was priced as 4s to yield 3.14% and a 2046 maturity was priced as 5s to yield 2.86%. The deal is rated A by S&P and Fitch.
Citigroup is set to price the San Diego County Water Authority's $340 million of senior Series 2016A green bonds and 2016B bonds. The bonds are rated triple-A by S&P and AA-plus by Fitch.
On Tuesday, Morgan Stanley priced the SDCWA's $87.69 million of Series 2016S-1 subordinate lien water revenue refunding bonds. The deal was priced as 3s and 5s to yield 1.07% in a split 2021 maturity. That deal was rated Aa3 by Moody's, AA-plus by S&P and AA by Fitch.
Since 2008, the SDCWA has sold about $1.79 billion of debt, with the most issuance occurring in 2008 when it issued $558 million. The SDCWA saw a low year of issuance in 2015, when it came to market with $185 million. The authority did not sell bonds in 2009, 2010, 2012 or 2014.
Piper Jaffray is expected to price the Pennsylvania Turnpike Commission's $440 million of Series 2016 A1 and A2 revenue bonds.
On the short-term negotiated calendar, Wells Fargo Securities is set to price Los Angeles County's $800 million of tax and revenue anticipation notes on Wednesday.
Bond Buyer Visible Supply
The Bond Buyer's 30-day visible supply calendar decreased $4.16 billion to $12.91 billion on Wednesday. The total is comprised of $6.39 billion of competitive sales and $6.52 billion of negotiated deals.
