Munis rally hard in constructive secondary trading; issuers benefit in primary

Municipals rallied hard in secondary trading as issuers benefited in the primary market, which saw another active day, including an upsized $2 billion pricing from New York Transportation Development Corp. and a competitive loan from high-grade Alexandria, Virginia, which saw yields come well through triple-A curves.

U.S. Treasuries were firmer and equities ended mixed.

Triple-A yields were bumped nine to 15 basis points, depending on the curve, while UST yields fell up to nine basis points at two-years.

The two-year muni-to-Treasury ratio Wednesday was at 62%, the three-year at 62%, the five-year at 62%, the 10-year at 63% and the 30-year at 85%, according to Refinitiv Municipal Market Data’s 3 p.m., ET, read. ICE Data Services had the two-year at 61%, the three-year at 61%, the five-year at 61%, the 10-year at 63% and the 30-year at 84% at 4 p.m.

The continued drop in yields has been “buoyed by a broad rate rally and intra-market fundamentals that simply have created more buyers than sellers,” noted Kim Olsan, senior vice president of municipal bond trading at FHN Financial.

“The magnitude of the rally will only be fully known as December business unfolds and supply addresses [Dec. 1 and Dec. 15] redemptions,” she said.

Bond Buyer 30-day visible supply was at nearly $13 billion as of Tuesday, while the net negative supply figure is at $13.642 billion, according to Bloomberg.

Along with certain issues “going into accelerated pricings, an announced sale of $2.1 billion Pennsylvania GOs next week creates volume from an issuer who has not sold GOs that late in the year since 2010,” Olsan said.

Additionally, the New York City Transitional Finance Authority is set to price $1.4 billion of future tax-secured subordinate bonds in both the negotiated and competitive market next week, according to MuniOS.

Ohio’s Water Authority “advanced a pricing of Aaa/AAA bonds [on Tuesday] with a schedule of 2027 to 2033, netting a maximum yield of 2.98% (+8/BVAL),” she said, while the Los Angeles Community College District advanced a pricing of a $575 million deal Wednesday.

November’s rally has offered “a broad swath of issuers entry points that are 50 basis points or lower from October but taken valuable yield away from investors,” she noted.

The Palm Beach County School Board, Florida, priced Aa3/NR certificates of participation “with a 5% due 2040 yielding 3.87% — spread +38/BVAL but also well through a 4%+ yield that would have prevailed a month ago,” according to Olsan.

“Secondary flows mirror those of new issues, where it’s taking on- or through-scale levels to have successful bids,” she said. “The byproduct of that strength is that bidders are accepting much tighter spreads in exchange for access to product.”

Muni yields could “further test resistance ranges from earlier this year,” she said.

The 10-year AAA BVAL yield currently is at 2.71%, 15 basis points away from the 2023 median yield, “with the next stop through 2.50% from the end of July,” she said.

Long yields are within a “similar gap” — the 30-year BVAL 3.76% yield is 22 basis points above the 2023 median with 3.50% being the next leg down in yield to test, she noted. 

Municipal mutual fund losses slowed last week as the Investment Company Institute Wednesday reported investors pulled only $97 million from the funds in the week ending Nov. 21 after $1.531 billion of outflows the previous week.

Exchange-traded funds saw another week of inflows to the tune of $786 billion after inflows of $733 million the week prior, according to ICI.

In the primary market Wednesday, Citigroup Global Markets priced and repriced for the for the New York Transportation Development Corp. (Baa3//BBB-/BBB-/) an upsized $2 billion from $1.5 billion of green AMT John F. Kennedy International Airport New Terminal One Project special facilities revenue bonds, Series 2023, with yields lowered up to 25 basis points from the preliminary pricing: 5.5s of 6/2038 at 4.74% (-20), 5.5s of 2043 at 4.65% (-25), 5s of 2049 at 5.05%, 6s of 2054 at 5.41% (-20), 5.125s of 2060 at 5.21% and 5.375s of 2060 at 5.56%, callable 6/30/2031.

BofA Securities accelerated a preliminarily pricing for the Los Angeles Community College District (Aaa/AA+//) $575 million of tax-exempt GOs. The first tranche, $175 million of Series M, with 5s of 8/2024 at 2.89%, 5s of 2028 at 2.56%, 5s of 2033 at 2.63% and 5s of 2038 at 3.09%, callable 8//1/2033.

The second tranche, $400 million of Series D, with 5s of 8/2024 at 2.89%, 5s of 2028 at 2.56% and 5s of 2030 at 2.60%, noncall.

KeyBanc Capital Markets priced for the Economic Development Authority of the Isle Of Wight County, Virginia (A1/AA//), $257.510 million of Assured Guaranty-insured Riverside Health System health system revenue bonds, Series 2023, with 5s of 7/2026 at 3.21%, 5s of 2028 at 3.15%, 5s of 2033 at 3.47%, 5s of 2038 at 4.06%, 5.25s of 2043 at 4.22%, 5.25s of 2048 at 4.44%, 5.25s of 2053 at 4.54% and 4.75s of 2053 at 4.77%, callable 7/1/2033.

KeyBanc Capital Markets priced for EP Tuscany Zaragosa PFC, Texas (/A+//), $101.610 million of HOME Essential Function Housing Program Project residential development revenue bonds, Series 2023, with 4s of 12/2033 at 4.35%, callable 12/1/2028.

In the competitive market, Alexandria, Virginia, (Aaa/AAA//) sold $246.635 million of GO capital improvement bonds, to BofA Securities, with 5s of 12/2024 at 2.94%, 5s of 2028 at 2.56%, 5s of 2033 at 2.65%, 5s of 2038 at 3.19%, 4s of 2043 at par, 4s of 2048 at 4.10% and 4s of 2053 at 4.18%, callable 12/15/2033.

Secondary trading
California 5s of 2024 at 2.90% versus 3.17% on 11/22 and 3.20% on 11/21. NYC 5s of 2024 at 3.19%. Ohio 5s of 2025 at 2.89%.

Maryland 5s of 2027 at 2.75%-2.74% versus 2.84% Tuesday. NYC TFA 5s of 2028 at  2.75% versus 2.81% Tuesday. Triborough Bridge and Tunnel Authority 4s of 2029 at 2.78%.

California 5s of 2033 at 2.78% versus 2.88%-2.80% Tuesday and 2.93%-2.91% Monday. Virginia College Building Authority 5s of 2035 at 2.86%-2.83%. DASNY 5s of 2035 at 2.94%-2.88%.

Massachusetts 5s of 2049 at 4.04%-4.02% versus 4.10% Tuesday and 4.35^-4.32% on 11/16. NYC 5s of 2051 at 4.11%-4.10% versus 4.21%-4.20% Tuesday and 4.32%-4.34% on 11/17.

AAA scales
Refinitiv MMD’s scale was bumped 12 to 15 basis points: The one-year was at 3.02% (-12) and 2.86% (-12) in two years. The five-year was at 2.61% (-15), the 10-year at 2.68% (-15) and the 30-year at 3.79% (-12) at 3 p.m.

The ICE AAA yield curve was bumped nine to 15 basis points: 3.03% (-12) in 2024 and 2.88% (-14) in 2025. The five-year was at 2.64% (-15), the 10-year was at 2.74% (-13) and the 30-year was at 3.80% (-9) at 4 p.m.

The S&P Global Market Intelligence municipal curve was bumped 12 basis points: The one-year was at 2.96% (-12) in 2024 and 2.83% (-12) in 2025. The five-year was at 2.69% (-12), the 10-year was at 2.76% (-12) and the 30-year yield was at 3.77% (-12), according to a 3 p.m. read.

Bloomberg BVAL was bumped 11 to 13 basis points: 2.95% (-12) in 2024 and 2.88% (-12) in 2025. The five-year at 2.63% (-13), the 10-year at 2.71% (-13) and the 30-year at 3.76% (-11) at 4 p.m.

Treasuries were firmer.

The two-year UST was yielding 4.644% (-9), the three-year was at 4.401% (-8), the five-year at 4.217% (-7), the 10-year at 4.262% (-7), the 20-year at 4.618% (-8) and the 30-year Treasury was yielding 4.440% (-8) near the close.

Primary on Tuesday
Wells Fargo priced for the Virginia Housing Development Authority (Aaa/AAA//) $505 million of commonwealth mortgage bonds. The first tranche, $50 million of non-AMT bonds, Series 2023C, saw all bonds price at par: 3.5s of 1/2025, 3.7s of 1/2028, 3.7s of 7/2028, 3.95s of 1/2033, 4s of 7/2033, 4.375s of 7/2038, 4.7s of 7/2043, 4.875s of 7/2048 and 4.95s of 1/2054, callable 7/1/2032.

The second tranche, $100 million of taxables, Series 2023D, saw all bonds price at par: 5.333s of 1/2025, 5.238s of 1/2028, 5.288s of 7/2028, 5.73s of 1/2033, 5.75s of 7/2033, 5.83s of 7/2038, 6.025s of 7/2043, 6.145s of 7/2048 and 6.175s of 1/2054, callable 7/1/2032.

The third tranche, $200 million of non-AMT bonds, Series 2023E-1, saw 3.85s of 1/2055 with a mandatory tender date of 1/1/2025 price at par, callable 3/15/2024.

The fourth tranche, $155 million of non-AMT bonds, Series 2023E-2, saw 3.9s of 7/2055 with a mandatory tender date of 7/1/2025 price at par, callable 9/16/2024.

Citigroup Global Markets priced for the Ohio Water Development Authority (Aaa/AAA//) $200 million of green Water Pollution Control Loan Fund revenue bonds, Series 2023C, with 5s of 12/2027 at 2.82%, 5s of 6/2028 at 2.82%, 5s of 12/2028 at 2.82%, 5s of 6/2033 at 2.95% and 5s of 12/2033 at 2.98%, callable 9/1/2033.

Primary to come:
Miami-Dade County, Florida (A3//A/), is set to price Thursday $455.110 million of taxable seaport revenue bonds, Series 2023, serials 2026-2038, term 2055. Stifel, Nicolaus & Co.

Manatee County, Florida (Aaa//AA+/), is set to price Thursday $175 million of revenue improvement bonds, serials 2026-2043, terms 2048, 2053. BofA Securities.

The Ohio Housing Finance Agency (Aaa///) is set to price Thursday $130 million of taxable social Mortgage-Backed Securities Program residential mortgage revenue bonds, 2023 Series C. J.P. Morgan Securities.

The Fort Bend County Public Facilities Corp., Texas (Aa2//AA/), is set to price Thursday $107.230 million of lease revenue bonds, Series 2023, serials 2025-2053. Raymond James & Associates.

Competitive
Westchester County, New York, is set to sell $125.469 million of GOs, 2023 Series A, at 11 a.m. Thursday; $27.468 million of GOs, 2023 Series B1, at 11:15 a.m. Thursday; $34.035 million of taxable GOs, 2023 Series C, at 11:30 a.m. Thursday; and $15.625 million of taxable GOs, 2023 Series D, at 11:45 a.m. Thursday.