The municipal bond market went back to school on Tuesday as two big education sales from Southeast issuers came to market while the Federal Reserve gathered in Washington to decide the future direction of U.S. monetary policy.
Primary market
The University of Alabama’s Board of Trustees (NR/AA/NR) competitively sold $171.525 million of general revenue bonds in two offerings.
Citigroup won the $144.285 million of Series 2019B with a true interest cost of 3.194% and also won the $27.24 million of Series 2019A bonds with a TIC of 1.6579%.
Proceeds are being issue to finance certain capital improvements. The financial advisor is Protective Securities, a division of ProEquities. The bond counsel is Maynard Cooper.
Since 2009, the university has sold about $2 billion of bonds with the most issuance occurring in 2010 when it sold $446 million. It did not come to market in 2011.
The Florida Board of Education (Aaa/AAA/AAA) sold $135.465 million of Series 2019B public education capital outlay refunding general obligation bonds. Citi won the bonds with a TIC of 2.5795%.
Proceeds will be used to refund a portion of the outstanding Series 2008D Build America Bonds. The Florida Division of Bond Finance was the financial advisor. Squire Patton was the bond counsel.
Morgan Stanley priced the Metropolitan Water District of Southern California’s (NR/AA+/AA+) $240.9 million of Series 2019A subordinate water revenue refunding bonds.
Morgan Stanley also priced the Pittsburgh Water and Sewer Authority, Pennsylvania’s $214.135 million deal consisting of $109.82 million of Series 2019A water and sewer system first lien revenue bonds and $104.315 million Series 2019B water and sewer system subordinate revenue refunding bonds.
Assured Guaranty Municipal Corp. insured $99.82 million of the Series 2019A bonds except for the 2020-2023 maturities and insured all of the $104.315 million of the Series 2019B bonds.
Citigroup priced the Indiana Finance Authority’s (Aa2/AA/AA) $291.645 million of hospital revenue bonds for the Indiana University Health Obligated Group as a remarketing.
Goldman Sachs priced the Harris County Cultural Education Facilities Finance Corp.’s (Aa2/AA/AA) $234.93 million of hospital revenue bonds for Texas Children's Hospital.
JPMorgan priced East Bay Municipal Utility District of Alameda and Contra Costa Counties, California’s (Aa1/AAA/NR) $161.82 million of Series 2019A water system revenue green bonds.
On Wednesday, Georgia is selling $950.905 million of unlimited tax general obligation bonds in four sales. The deals consist of $351.185 million of Series 2019A Tranche 1 GOs and Series 2019C refunding GOs, $321.17 million of Series 2019A Tranche 2 GOs, $141.07 million of Series 2019B taxable GOs and $137.48 million of Series 2019B taxable GOs.
Citi is expected to price the Pennsylvania Turnpike Commission’s (A3/NR/A-/A+) $706.335 million of Series 2019A turnpike subordinate revenue bonds on Wednesday.
On Thursday, the Dormitory Authority of the State of New York’s plans to competitively sell $1.633 billion of state personal income tax general purpose revenue bonds. DASNY’s offerings consist of $419.31 million of Series 2019A Bidding Group 2 tax-exempts, $414.14 million of Series 2019A Bidding Group 4 tax-exempts, $394.34 million of Series 2019A Bidding Group 1 tax-exempts, $393.435 million of Series 2019A Bidding Group 3 tax-exempts and $11.975 million of Series 2019B taxables. Public Resources Advisory Group is the financial advisor.
Tuesday’s bond sales
NYC Water Authority to sell $850M of bonds
The New York City Municipal Water Finance Authority said Tuesday that it expects to sell two tax-exempt, fixed rate bond sales totaling $850 million.
The authority plans to sell $450 million of Fiscal Year 2020AA second general resolution revenue bonds on Tuesday, June 25, after a one-day retail order period on Monday, June 24.
Proceeds will be used to refund certain outstanding bonds for savings. The FY2020AA bonds will be priced by book-running lead manager Raymond James with Barclays and Siebert Cisneros Shank & Co. as co-senior managers.
The authority also plans to sell $400 million of Fiscal Year 2020BB second general resolution revenue bonds on Wednesday, July 10, after a one-day retail order period on Tuesday, July 9.
Proceeds will be used to fund capital projects for the water and sewer system. The FY2020BB bonds will be priced by book-running lead manager Barclays with Raymond James and Siebert Cisneros Shank & Co. as co-senior managers.
Secondary market
The Federal Open Market Committee began its two-day meeting on Tuesday and will conclude Wednesday afternoon by issuing a new Summary of Economic Projections and hold a press conference presided over by Chair Jerome Powell. While the markets are pricing in two or three interest rate cuts this year,
Munis were mixed on the
On Refinitiv Municipal Market Data’s AAA benchmark scale, the yield on the 10-year muni GO remained unchanged at 1.66% while the 30-year muni yield fell one basis point to 2.34%.
“The ICE Muni Yield Curve is range-bound as the market waits for the FOMC meeting to conclude tomorrow,” ICE Data Services said in a Tuesday market comment. “Taxable yields are down in line with Treasuries, led by the 10-year maturities down 4.5 basis points. High-yield and tobacco yields are one basis point lower across the board.”
The 10-year muni-to-Treasury ratio was calculated at 80.7% while the 30-year muni-to-Treasury ratio stood at 91.7%, according to MMD.
Treasuries were stronger as stocks traded up. The Treasury three-month was yielding 2.201%, the two-year was yielding 1.870%, the five-year was yielding 1.832%, the 10-year was yielding 2.055% and the 30-year was yielding 2.544%.
Societe Generale said on Tuesday that its views for the second half of the year are based on the expectation of a slowdown in growth and ultimately a recession in 2020, continued softness in core inflation, and persistently low global yields.
"We believe these factors will lead to an upcoming Fed easing cycle, which over the medium term should result in lower yields and a modestly steeper curve, with the market anticipating both rate cuts and possible renewed QE afterwards," Subadra Rajappa, head of U.S. rates strategy, wrote in a market note. "Swap spreads should generally continue to narrow, with front-end spreads being the exception due to their sensitivity to credit widening in an economic downturn. While implied vols will experience bouts of spikes on increased uncertainties, a sustained breakout from the low-vol regime is unlikely given the lack of rebuild in market term premiums, as reflected by the flat rate curvature."
Previous session's activity
The MSRB reported 35,304 trades Monday on volume of $9.57 billion. The 30-day average trade summary showed on a par amount basis of $12.47 million that customers bought $6.14 million, customers sold $4.23 million and interdealer trades totaled $2.11 million.
Texas, California and New York were most traded, with the Lone Star State taking 11.956% of the market, the Golden State taking 11.889% and the Empire State taking 10.52%.
The most actively traded security was the Puerto Rico Series 2012A public improvement refunding 5s of 2041, which traded 20 times on volume of $46.23 million.
Treasury to sell $40B 4-week bills
The Treasury Department said it will sell $40 billion of four-week discount bills Thursday. There are currently $35.000 billion of four-week bills outstanding.
Treasury also said it will sell $35 billion of eight-week bills Thursday.
Treasury sells year bills
The Treasury Department Tuesday auctioned $26 billion of 364-day bills at a 1.985% high yield, a price of 97.992944. The coupon equivalent was 2.049%. The bid-to-cover ratio was 2.88.
Tenders at the high rate were allotted 73.55%. The median yield was 1.950%. The low yield was 1.920%.
Gary E. 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.
