Municipal traders saw the first of this week's new issues hit screens, as yields were still on the rise through midday, according to traders.
Secondary Market
Munis were weaker, as the yield on the 10-year benchmark muni general obligation was anywhere from one to three basis points higher from 2.16% on Monday, while the yield on the 30-year increased anywhere from one to three basis points from 2.98%, according to a read of Municipal Market Data's triple-A scale.
On Monday, yields skyrocketed up 22 basis points on both the 10-year and 30-year, as post-election jitters continued to hit munis hard.
According to Dan Berger, senior market strategist at TM3/MMD, the 10-year range has already reached its 12-month high and the 20-year range is very close to its 12-month high.
U.S. Treasuries were mostly stronger on Tuesday morning. The yield on the two-year rose to 1.01% from 0.99% on Monday, the 10-year Treasury dropped to 2.22% from 2.23% and the yield on the 30-year Treasury bond decreased to 2.95% from 2.99%.
The 10-year muni to Treasury ratio was calculated at 97.2% on Monday compared to 91.7% on Thursday, while the 30-year muni to Treasury ratio stood at 99.9% versus 94.3%, according to MMD.
"Monday was a very sloppy session for munis and there were still indications of bonds coming easier, mostly in the intermediate serial range," said Randy Smolik, senior market analyst at MMD.
Primary Market
Wells Fargo priced the city of Richmond, Va.'s $500.195 million of public utility revenue and refunding bonds, series 2016A, to yield from 0.80% with a 4% coupon in 2017 to 3.66% with a 4% coupon in 2037. A term bond in 2040 was priced to yield 3.72% with a 4% coupon and a term bond in 2046 was priced to yield 3.78% with a 4% coupon. The deal is rated Aa2 by Moody's Investors Service and AA by S&P Global Ratings and Fitch Ratings.
Since 2006, the city of Richmond has sold roughly $2.13 billion of securities, with the largest issuance before Tuesday's sale occurring in 2013 when it sold $375 million. The city did not issue any bonds in 2008 or 2011.
In the competitive arena, the Washington Suburban Sanitary District, Md., sold $381.81 million of consolidated public improvement bonds of 2016, Second Series. Bank of America Merrill Lynch won the auction with a true interest cost of 3.58%. The bonds were priced to yield from 0.85% with a 2% coupon in 2017 to 3.68% with a 4% coupon in 2046. The deal is rated triple-A by Moody's, S&P and Fitch.
The last time Washtubs sold bonds competitively, was on May 17, when Wells Fargo won $145 million of bonds with a TIC of 2.81%.
The commonwealth of Massachusetts sold $200 million of transportation fund revenue bonds for the rail enhancement and accelerated bridge programs, BAML won the bidding with a TIC of 3.86%. The bonds were priced to yield from 3.60% with a 4% coupon in 2042 to 3.63% with a 4% coupon in 2046. The deal is rated Aa1 by Moody's and AAA by S&P.
The last time the commonwealth sold bonds competitively, Dec. 9, 2015, when Morgan Stanley won $100 million of bonds with a TIC of 4.06%.
The Board of Trustees for the University of Alabama at Birmingham sold two issues totaling roughly $116.54 million. BAML won the larger issue, $93.73 million, with a TIC of 3.83%. The bonds were priced to yield from 2.74% with a 5% coupon in 2027 to 3.71% with a 4% coupon in 2039. A 2043 term bond was priced to yield 3.80% with a 4% coupon. The $22.81 million deal was won by Regions Bank with a TIC of 1.94%. Both transactions are rated Aa2 by Moody's.
Municipal CUSIP Requests Rise 7% in Oct.
Demand for new municipal CUSIP identifiers increased 7% in October, CUSIP Global Services said in a report released on Tuesday.
A total of 1,368 new municipal bond identifier requests were made last month, reaching a four-month high and enough to keep year-over-year municipal issuance growth levels positive at 8%.
The report tracks requests by issuers for bond identifiers as an early indicator of new volume and suggests a resurgence of municipal issuance in the next several weeks.
"October was notable for the strong volume of new CUSIP requests we received, but also for the record dollar value of bond offerings that were made over the course of the month," said Gerard Faulkner, director of operations for CUSIP Global Services. "Clearly, we're seeing a market environment in which debt issuers find it favorable to issue a large number of significant deals and our data supports that trend continuing into the near-term future."
Richard Peterson, senior director at S&P Global Market Intelligence, said a number of factors are at play in this data. "In addition to the overall favorable lending environment, we're also seeing significant M&A deal volume, which is increasing the demand for new debt instruments to finance those transactions," he said. "This combination of low interest rates and relatively robust capital markets activity should create a recipe for strong security issuance volumes as we head into 2017."
MSRB: Previous Session's Activity
The Municipal Securities Rulemaking Board reported 41,850 trades on Monday on volume of $12.296 billion.
Bond Buyer Visible Supply
The Bond Buyer's 30-day visible supply calendar increased $195.1 million to $15.41 billion on Tuesday. The total is comprised of $4.12 billion of competitive sales and $11.28 billion of negotiated deals.
