Municipals tumble with yields up 2 to 3 bps as Treasuries fall; Miami-Dade County brings debt

By Sheri Kasprzak

New York, May 19 – Municipals weakened on the day Tuesday as Treasuries fell and as another rush of supply came in, traders said.

The 10-year muni yield rose by 2 basis points to end at 2.28%, and the 30-year rose 3 bps to 3.28%, said a trader in the afternoon.

The market outperformed Treasuries, which saw yields rise by 3 bps to 6 bps after positive April housing starts data and a heavy corporate calendar pressured the market.

Miami-Dade sells bonds

Heading up the day’s heavy primary calendar, Miami-Dade County, Fla., sold $482.18 million of series 2015 water and sewer system revenue refunding bonds.

The bonds (Aa3/A+/A+) were sold through Jefferies & Co.

The bonds are due 2018 to 2026 with 3% to 5% coupons.

Proceeds will be used to advance refund the county’s series 2007 and 2008C water and sewer revenue bonds.

NYC Water bonds price

Elsewhere during the day, the New York City Municipal Water Finance Authority hit the market with $452,165,000 of series 2015HH water and sewer system second general resolution revenue bonds.

The bonds (Aa2/AA+/AA+) were sold through senior manager Barclays.

The bonds are due 2025 to 2032 and 2037 to 2039 with 3.5% to 5% coupons.

Proceeds will refund and redeem the authority’s series 2005C-D and 2006A first resolution revenue bonds.

Storms converge on munis

Municipals have struggled for the past couple of weeks, pressured in no small part by supply, interest rates and bad news headlines, according to J.R. Rieger, global head of fixed income with S&P Dow Jones Indices.

Some sources expect supply to total more than $11 billion this week.

“New supply has in the past been absorbed by the hungry municipal bond market looking for tax-free paper, but this wave comes just before a holiday when trading typically slows,” Rieger wrote in a note Tuesday.

Interest rates also pushing upward. The S&P/BGCantor Current 30 Year U.S. Treasury Bond index peaked at more than 3% last week, the highest levels since November, Rieger noted.

Also impacting the market is headline risk, as stories about Chicago, Illinois, New Jersey and Puerto Rico debt all circulate, adding some weight to the market.

“The combination has put a heavy weight on the investment-grade tax-free bond market, which has seen negative returns in 2015,” Rieger wrote.

“The S&P National AMT-Free Municipal Bond index is down 0.73% month-to-date and 0.36% year-to-date.”

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