Municipals finished little changed on Wednesday as more supply came to market as hungry buyers gobbled up the new deals.
The market was little chaged on the day after munis saw a slight improvement on Tuesday when yields dipped two basis points on the long end. This is being supported by the extremely strong demand, according to Howard Mackey, managing director at NW Financial in Hoboken, N.J.
“We have seen the market remain unchanged for several days and yesterday from 2028 and out we saw a two basis-point bump,” he said, pointing to the recent inflows into municipal mutual funds to the tune of $1.5 billion. ICI on Wednesday reported inflows continued.
Due to the voracious appetite, he said there is a scarcity of specialty state paper, which has been trading through the generic benchmark scales in some cases.
“It’s a fairly liquid and active market there, particularly throughout the curve and inside 10 years,” Mackey said.“Investors have to put money to work and they seem to be coming into the market, even though there is very little product,” he added.
Meanwhile, Treasuries are trading in a range, supported by the Federal Reserve Board’s vow to maintain liquidity, keep rates low, and participate in a program of buying bonds and high-grade securities, according to Mackey.He expects this week’s firmness to lead to further improvement given the overall market technicals.
“I expect it will start to improve and lower yields will start to drift down slowly,” he said. The direction toward lower yields will probably be between now and the end of the year.”
Primary market
JPMorgan Securities priced the Regents of the University of California’s (Aa2/AA/AA/NR) tax-exempt revenue bonds for retail investors on Wednesday and took indications of interest on the taxable portion of the deal.
The issue was composed of $790.45 million of tax-exempt Series BE, $328.305 million of taxable Series BF and $1.2 billion of taxable Series BG.
The $790.45 million of tax-exempt Series2020BE bonds were priced for retail to yield from 0.17% with a 5% coupon in 2021 to 1.74% with a 4% coupon in 2040. A 2046 term bond was priced to yield 1.94% with a 4% coupon and a 2050 term was priced to yield 2.26% with a 3% coupon.
JPMorgan also took indications of interest on the $1.2 billion of Series BG taxables and the $328.305 million of Series 2020 BF taxables.
For the Series BG taxables, interest ranged from 80 basis points above the comparable Treasury security in 2025, 100 basis points above the comparable Treasury security in 2027 and 115 basis points above the comparable Treasury security in 2030.
For the Series BG taxables, interest ranged from 40 basis points above the comparable Treasury security in 2021, 50 basis points above the comparable Treasury security in 2022 and 60 basis points above the comparable Treasury security in 2023.
Proceeds of the Series BE and Series BF bonds will be used to finance or refinance university projects and refunding; proceeds of the BG bonds will be used for the capital program.
Citigroup priced Oregon’s (Aa1/AA+/AA+/NR) $354.17 million of taxable general obligation refunding bonds for higher education.
The Series 2020O Article XI-F(1) bonds were priced at par to yield from 0.455% in 2022 to 1.996% in 2036 and 2.419% in 2043. The Series 2020Q bonds Article XI-G bonds were priced at par to yield from 0.305% in 2021 to 1.996% in 2036 and 2.369% in 2041.
Citi priced the Board of Regents of Texas Tech University System’s (Aa1/AA+/NR/NR) $314.74 million of taxable revenue financing system refunding and improvement bonds.
The bonds were priced at par to yield from 25 basis points over the comparable U.S. Treasury security in 2020 to 160 basis point over Treasuries in 2035, 137 basis points over Treasuries in 2040 and 150 basis points over Treasuries in 2050.
BofA Securities priced and repriced the Massachusetts Development Finance Authority’s (NR/AA/BBB+/NR) $181.555 million of Series 2020C revenue bonds for Wellforce Inc. The deal was insured by Assured Guaranty Municipal Corp.
The bonds were repriced to yield from 0.75% with a 5% coupon in 2021 to 3.03% with a 3% coupon in 2040. A spilt 2045 term maturity was priced to yield 3.07% with 3% coupon and 2.68% with a 4% coupon.
The bonds had been tentatively priced to yield from 0.90% with a 5% coupon in 2021 to 3.11% with a 3% coupon in 2040. A spilt 2045 term maturity was priced to yield 3.21% with 3% coupon and 2.91% with a 4% coupon.
BofA also priced the DFA’s $53.325 million of taxable Series 2020D revenue bonds for Wellforce. The deal was priced at par to yield 3.52% in 2046. The bonds were also insured by AGM.
Goldman Sachs priced the Louisiana Public Facilities Authority’s (A2/A/NR/NR) $188.945 million of revenue and refunding bonds for the Tulane University of Louisiana project.
The bonds were priced to yield from 0.84% with a 5% coupon in 2025 to 1.66% with a 5% coupon in 2032 and from 1.83% with a 5% coupon in 2034 to 2.27% with a 4% coupon in 2040. A 2045 term bond was priced to yield 2.19% with a 5% coupon and a 2050 term was priced to yield 2.44% with a 4% coupon.
BofA priced the San Diego County Water Authority, Calif.’s (Aa2/AAA/AA+/NR) $120.6 million of water revenue refunding green bonds.
The deal was priced to yield from 0.45% with a 5% coupon in 2022 to 1.13% with a 5% coupon in 2031.
Wells Fargo Securities priced the Virginia Housing Development Authority’s (Aa1/AA+/NR/NR) $200 million of Series 2020F taxable rental housing bonds.
The bonds were priced at par to yield from 65 basis points above the comparable Treasury security in 2023 to 170 basis points above the comparable Treasury in 2032, 185 basis points above the comparable Treasury in 2035, 160 basis points above the comparable Treasury in 2040, 175 basis points above the comparable Treasury in 2045, 190 basis points above the comparable Treasury in 2050 and 205 basis points above the comparable Treasury in 2055.
RBC Capital Markets received the official award on the Mountain View-Los Altos Union High School District of Santa Clara County, Calif.’s (Aaa/AAA/NR/NR) $100 million of general obligation bonds, Election of 2018 Series B.
The 2020 maturity was priced as a taxable bond at par to yield 0.25%. The rest of the issue was priced as tax-exempts to yield from 0.10% with a 3% coupon in 2021 to 1.90% with a 1.875% coupon in 2034.
In the competitive arena on Wednesday, the Las Vegas Valley Water District, Nev., (Aa1/AA//) sold $100 million of Series 2020C limited tax general obligation water bonds additionally secured by pledged revenues.
Wells Fargo Securities won the bonds with a true interest cost of 2.17%. The issue was priced to yield from 0.25% with a 5% coupon in 2021 to 2.41% with a 2.5% coupon in 2050.
Hobbs, Ong & Associates and PFM were the financial advisors; Sherman & Howard was the bond counsel.
Houston, Texas, (MIG1/NR/F1+/NR) sold $230 million of tax and revenue anticipation notes. Seven groups won the TRANs.
Winners included BofA, Goldman Sachs, Morgan Stanley, PNC Capital Markets, Wells Fargo Securities, RBC and JPMorgan.
Masterson Advisors and RSI Group were the financial advisors; Holland & Knight and the State Attorney General were the bond counsel.
On Thursday, Citigroup will price the District of Columbia’s (Aa1/AAA/AA+/NR) $607 million of tax-exempt and taxable income tax secured revenue bonds.
Barclays Capital is set to price Howard University’s $215 million of corporate CUSIP taxable bonds. The deal will be insured by AGM.
RBC is expected to price the Tacoma School District No. 1, Pierce County, Wash.'s (Aaa/AA+//) $432 million of taxable GOLT refunding bonds. The deal is backed by the Washington state credit enhancement program.
ICI: Muni bond funds see $2.3B inflow
Long-term municipal bond funds and exchange-traded funds saw combined inflows of $2.315 billion in the week ended July 1, the Investment Company Institute reported Wednesday.
It marked the ninth week in a row the funds saw inflows. In the previous week, muni funds saw a revised inflow of $2.876 billion originally reported as a $2.923 billion inflow, ICI said.
Long-term muni funds alone had an inflow of $1.727 billion in the latest reporting week after a revised inflow of $2.562 billion in the prior week originally reported as a $2.610 billion inflow.
ETF muni funds alone saw an inflow of $589 million after an inflow of $313 million in the prior week.
Taxable bond funds saw combined inflows of $16.462 billion in the latest reporting week after inflows of $22.183 billion in the prior week.
ICI said the total combined estimated outflows from all long-term mutual funds and ETFs were $4.912 billion after revised inflows in the prior week of $8.901 billion originally reported as a $7.626 billion inflow.
Secondary market
Readings on MMD’s AAA benchmark scale were unchanged on Wednesday. Yields on the 2021 and 2023 maturities were steady at 0.25% and 0.27%, respectively. The yield on the 10-year GO muni was flat at 0.88% while the 30-year yield was steady at 1.61%.
The 10-year muni-to-Treasury ratio was calculated at 135.4% while the 30-year muni-to-Treasury ratio stood at 115.7%, according to MMD.
The ICE AAA municipal yield curve showed short yields steady at 0.220% and 0.223% in 2021 and 2022, respectively, while the 10-year maturity was flat at 0.838% and the 30-year was nearly unchanged at 1.629%.
ICE reported the 10-year muni-to-Treasury ratio stood at 137% while the 30-year ratio was at 115%.
BVAL reported unchanged levels on the one-year, two-year, 10-year, while the 30-year was lower by one basis point to 1.64%.
The IHS Markit municipal analytics AAA curve showed the 2021 maturity yielding 0.24% and the 2022 maturity at 0.27% while the 10-year muni was at 0.87% and the 30-year stood at 1.62%.
Munis were little changed on the MBIS benchmark and AAA scales.
Treasuries were weaker as stock prices traded higher.
The three-month Treasury note was yielding 0.150%, the 10-year Treasury was yielding 0.659% and the 30-year Treasury was yielding 1.390%.
The Dow rose 0.10%, the S&P 500 increased 0.20% and the Nasdaq gained 0.75%.
