Municipals improve as investors seek out safe havens; new-issue volume slips to $2.6 billion

By Sheri Kasprzak

New York, July 5 – Municipals rallied Tuesday, following but underperforming Treasuries, as investors turned their attention to safe havens amid global economic worries in the wake of Great Britain’s vote to exit the European Union, market sources said.

The triple-A 10-year muni bond yield fell by 4 basis points to 1.34%, and the 30-year bond yield fell by 5 bps to 2.12%.

Meanwhile, over in Treasuries, the 30-year bond yield fell by 10 bps to close the session at 2.14%, and the 10-year benchmark note yield fell by 9 bps to 1.37%. The five-year note yield ended the day 6 bps lower at 0.94%, and the two-year yield fell by 3 bps to 0.56%.

Stocks fell with the Dow Jones industrial average falling by 108.75 points, or 0.61%, to 17,840.62 and the Nasdaq falling 39.67 points, or 0.82%, to 4,822.90. The S&P 500 declined by 14.40 points, or 0.68%, to 2,088.55.

South Carolina leads deals

Only about $2.6 billion of new issues are expected to come to market during the holiday-shortened week.

The South Carolina Transportation Infrastructure Bank is slated to price $204,015,000 of series 2016A revenue refunding bonds (A1//A) on Thursday.

The bonds will be sold competitively and are due 2017 to 2037.

Proceeds will be used to refund all or a portion of the bank’s outstanding series 2007A-B revenue and refunding bonds.

Washington prices $1.3 billion

Moving to recent large deals, Washington state hit the market on Thursday with $1,294,530,000 of series 2017 general obligation bonds.

The offering included $389,965,000 of series 2017A various purpose bonds, $101.7 million of series 2017T taxable bonds, $531.28 million of series R-2017A motor vehicle fuel tax refunding bonds and $271,585,000 of series R-2017B motor vehicle fuel tax refunding bonds.

The 2017A bonds are due 2024 to 2041 with 5% coupons and yields from 1.41% to 2.25%.

The 2017T bonds are due 2017 to 2024 with 0.50% to 1.75% coupons and 0.50% to 1.87% yields.

The R-2017A bonds are due 2017 and 2019 to 2034 with 4% to 5% coupons and 0.52% to 2.07% yields.

The R-2017B bonds are due 2017 to 2034 with coupons from 4% to 5% and yields from 0.52% to 2.07%.

The bonds (Aa1/AA+/AA+) were sold competitively. J.P. Morgan Securities LLC won the bid for the series 2017A and 2017T taxable bonds at a 3.0759% true interest cost and a 1.4618% TIC, respectively. BofA Merrill Lynch won the bid for the series R-2017A and R-2017B motor vehicle fuel tax refunding bonds at a TIC of 2.3904% and a TIC of 2.2388%, respectively.

Proceeds will be used to finance statewide capital projects and refund existing debt.

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