Primary in focus as Illinois, Wisconsin, Nevada, Washington go competitive

Bonds

Municipal bond buyers saw a treasure trove of new deals swarm into the market Tuesday as the states of Illinois, Wisconsin, Nevada and Washington all sold bonds in the competitive arena.

In secondary trading, municipals turned weaker, with yields on the AAA scales rising by as much as two basis points on some longer-dated maturities.

“Tax-exempt bond yields in seven-years and longer edged higher by one to two basis points on Tuesday as increasing stimulus hopes boosted the risk-on bias in equities at the expense of U.S. Treasuries and other related bond markets,” said Greg Saulnier, Refinitiv MMD managing analyst. “In the backdrop, stocks got a boost after House Speaker Nancy Pelosi said the White House had ‘come a long way’ with regards to stimulus negotiations and downplayed the Tuesday deadline.”

Meanwhile, muni market participants are focused on the Nov. 3 elections, said Municipal Market Analytics Partner Matt Fabian, and specifically what that means for supply is that states and localities are looking to firm up their new-issue plans before that date.

“The current 30-day calendar is outstripping prior-year averages, fueled by taxables,” Fabian wrote in a Tuesday market report. “Year-to-date issuance (inclusive of bonds, notes, and corporate-tickered municipals) is ~13% ahead of last year, but tax-exempt issuance alone is ~13% behind.”

He said the rise of taxables has been a phenomenon for tax-exempts — new issuance has been more than accounted for with reinvestment and fresh capital while taxables have attracted relatively more energy away from the normal flow.

He noted that the dollar amount of par traded per dollar of primary market par is at a multi-year low.

“And dealers remain mostly unable to make traditional markets, minimizing secondary volumes and undermining price discovery, the latter shifting a greater share of emphasis to the primary market in setting evaluations and customer statement values,” Fabian said. “Still, an effective primary, not to mention the Fed’s aggressively accommodative context, has kept yields pegged near zero and spreads substantially closer than what credit prospects suggest.”

Primary market
The state of Illinois (Baa3/BBB-/BBB-/NR) sold $850 million of general obligation bonds in four offerings on Tuesday.

BofA Securities won the $325 million of Series of October 2020B GOs with a true interest cost of 3.7075%. The bonds were priced to yield from 2.58% with a 5% coupon in 2025 to 4.12% with a 4% coupon in 2035.

BofA also won the $300 million of Series of October 2020C GOs with a TIC of 4.3156%. The bonds were priced to yield from 4.14% with a 4.125% coupon in 2036 to 4.35% with a 4% coupon in 2042; a 2045 maturity was priced with a 4.25% coupon at a price of 97.75%.

JPMorgan Securities won the $125 million of taxable Series of October 2020A GOs with a TIC of 2.8259% and also won the $100 million of Series of October 2020D GOs with a TIC of 2.1534%.

Sycamore Advisors was the financial advisors. Chapman and Cutler and Burke Burns were the bond counsel.

Since 2010, the state has sold almost $38 billion of debt, with the most issuance occurring in 2010 when it sold $8.7 billion.

The state of Wisconsin (Aa1/AA/NR/NR) sold $228.215 million of Series 2020B GOs.

BofA Securities won the bonds with a TIC of 2.1758%. The bonds were priced to yield from 0.21% with a 5% coupon in 2021 to 1.76% with a 4% coupon in 2041.

Proceeds will be used for various general governmental purposes. State officials acted as the financial advisor; Foley & Lardner was the bond counsel.

The state of Nevada (Aa1/AA+/AA+/NR) sold $106.705 million of limited tax GOs in two issues.

BofA won the $103.78 million of Series 2020A capital improvement historic preservation and refunding bonds with a TIC of 1.7657%. The bonds were priced to yield from 0.27% with a 5% coupon in 2022 to 2.292% with a 2.125% coupon in 2039.

Wells Fargo won the $2.295 million of Series 2020B natural resources and refunding bonds with a TIC of 1.5999%.

JNA Consulting Group and Zions Public Finance were the financial advisors. Sherman & Howard was the bond counsel.

The state of Washington (Aaa/AA+/AA+/) sold $105.095 million of Series R-2021B various purpose GO refunding bonds. JPMorgan won the deal with a TIC of 0.2823%.

Piper Sandler and Montague DeRose & Associates were the financial advisors. Foster Garvey was the bond counsel.

Proceeds will be used to refund some of the callable Series R-2011A and Series R-2011B GOs.

The Virginia Public School Authority (Aa1/AA+/AA+/NR) competitively sold $473.64 million of school financing bonds in two offerings.

Wells Fargo Securities won the $330.045 million of Series 2020C taxable refunding bonds. The bonds were priced at to yield from 0.35% at par in 2021 to 0.75% at par in 2024 and from 1.25% at par in 2030 to 2.45% with a 2.25% coupon in 2036 and to yield 2.893% with a 2.70% coupon in 2041.

BofA won the $143.595 million of Series 2020B tax-exempt school financing and refunding bonds. The bonds were priced to yield from 0.22% with a 5% coupon in 2021 to 2.30% with a 2.25% coupon in 2040 and as 2.5s to yield 2.52% in 2045 and 2.57% in 2050.Proceeds will be used to refund certain outstanding bonds. Davenport & Co. is the financial advisor; McGuireWoods is the bond counsel.

Dallas, Texas, competitively sold $311.185 million of bonds in three offerings.

JPMorgan won the $208.93 million of Series 2020A GO refunding and improvement bonds with a TIC of 1.8694%. Wells Fargo won the $76.92 million of Series 2020B taxable GO refunding bonds with a TIC of 0.7809% and JPMorgan won the $25.335 million of Series 2020B obligations with a TIC of 0.5106%.

Proceeds will be used to refund some outstanding obligations and commercial paper notes and finance certain city improvements. PFM Financial Advisors and TKG & Associates were the financial advisors. Bracewell, West & Associates and Dallas officials were the bond counsel.

In the negotiated sector, BofA priced the Delaware Transportation Authority’s (A1/AA/NR/NR) $195.315 million of grant anticipation bonds. The deal was priced as 5s to yield from 0.23% in 2021 to 1.71% in 2035.

BofA priced William & Mary’s (NR/AA/NR/NR) $151.21 million of Series 2020A tax-exempt general revenue pledge bonds and Series 2020B taxable general revenue pledge and refunding bonds. The Series 2020A tax-exempts were priced to yield from 1.05% with a 5% coupon in 2029 to 2.23% with a 3% coupon in 2038. The Series 2020B taxable were priced to yield from 42 basis points above the comparable U.S. Treasury security in 2023 to 180 basis points above treasuries in 2040, 142 basis points above in 2040 and 152 basis points above in 2051.

BofA priced Southern Illinois Healthcare’s (NR/A+/AA-/NR) $100 million of Series 2020 corporate CUSIP taxable bonds. The bonds were priced at par to yield 3.97% in 2050.

Activity was modest Tuesday, according to Amy Raymond, manager of the fixed income department at Cumberland Advisors in Sarasota, Fl.

“Tomorrow looks to be a large tax-exempt new issue day,” she said, with the pricing of the $1.5 billion Illinois Commonspirit Health deal on Wednesday and the $1.9 billion Sutter Health deal on Thursday — both being priced by Morgan Stanley and both in the triple-B rating category, which might carry slightly attractive yields.

Meanwhile, Hawaii took indications of interest on its $900 million taxable portion of general obligation bonds Tuesday, while also conducting the first day of the retail order period on the $147.15 million tax-exempt series — both of which were too early to gauge the outcome, according to a New York trader.

Fitch Ratings downgraded Hawaii’s $7.7 billion of GOs and issuer default rating to AA from AA-plus and revised the outlook on the GOs to stable from negative just after the state loosened travel restrictions for visitors.

The New York trader said he didn’t expect Hawaii’s downgrade to have much of an impact on the pricing other than five basis points cheaper. The downgrade was largely expected by the market and didn’t come as a surprise ahead of the deal’s pricing this week, he said.

With billion-dollar deals expected to price on Wednesday and Thursday, investors were “starting to take chips off the table and wait” for those deals to arrive, according to the trader.

Secondary market
Some notable trades on Tuesday:
Pierce County, Washington SD #3 5s of 2021 traded at 0.24%-.020%. Washington GOs, 5s of 2022 trade at 0.23%-0.22%. Delaware GOs 5s of 2028 traded at 0.65%-0.63%. Baltimore County, Maryland 5s of 2025 at 0.35%-0.32%. Hennepin County, Minnesota 5s of 2029 at 0.90%, Thursday at 0.91%.

Conroe, Texas ISD 5s of 2030 at 1.01%-1.00%. Ohio waters, 5s of 2033 at 1.28%. Forsyth County, Georgia GO 5s of 2036 at 1.39%. NYC TFA subs (selling $1.1 billion next week) traded at 2.27%-2.22%. On Thursday they traded at 2.32%-2.31%. Ohio waters, 5s of 2040 at 1.61%-1.56%. University of Michigan 4s of 2045 at 1.96%. Conroe Texas ISD 2.25s of 2046 traded at 2.33% after trading at 2.29% on Thursday.

High-grade municipals were mixed on Tuesday, according to final readings on Refinitiv MMD’s AAA benchmark scale. Short yields in 2021 and 2022 were unchanged at 0.17% and 0.18%, respectively. The yield on the 10-year muni rose two basis points to 0.96% while the yield on the 30-year increased two basis points to 1.74%.

The 10-year muni-to-Treasury ratio was calculated at 120.0% while the 30-year muni-to-Treasury ratio stood at 108.8%, according to MMD

The ICE AAA municipal yield curve showed short maturities weakened as the 2021 maturity rose one basis point to 0.17% in 2021 and rose one basis point 0.18% in 2022. The 10-year maturity uibncreased two basis points to 0.92% and the 30-year was up two basis points to 1.74%.

The 10-year muni-to-Treasury ratio was calculated at 117% while the 30-year muni-to-Treasury ratio stood at 108%, according to ICE.

The IHS Markit municipal analytics AAA curve showed short yields up one basis point to 0.15% and 0.16% in 2021 and 2022, respectively, with the 10-year yielding 0.97% and the 30-year at 1.74%.

The BVAL AAA curve showed the yield on the 2021 maturity unchanged at 0.13%, the 2022 maturity steady at 0.15% while the 10-year rose two basis points to 0.93% and the 30-year gained two basis points to 1.73%.

Treasuries were weaker as stock prices traded higher.

The three-month Treasury note was yielding 0.10%, the 10-year Treasury was yielding 0.81% and the 30-year Treasury was yielding 1.61%.

The Dow rose 0.88%, the S&P 500 increased 0.98% and the Nasdaq gained 0.88%.

Christine Albano contributed to this report.

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