Municipals close weaker as Treasuries hit slump; Minnesota brings $1.09 billion of G.O. bonds

By Sheri Kasprzak

New York, Aug. 5 – Municipals weakened on the session Wednesday as Treasuries saw prices drop after positive economic data could signify a September rate hike, traders reported.

Yield on top-rated municipals were higher by as much as 3 basis points on the day, following but outperforming Treasuries. The 10-year and five-year Treasury note yields rose 5 bps for the session.

In other broad muni news, there was a significant increase in the number of muni securities trades during the second quarter, according to a report released Wednesday by the Municipal Securities Rulemaking Board.

“Municipal securities trading activity increased 14% in the second quarter of 2015 to 2.56 million trades, up from 2.24 million trades in the second quarter a year ago,” said the MSRB statement.

“The number of trades in the second quarter of this year was also up 14% from the previous quarter and is the highest quarterly number of trades since late 2013.”

Par amount traded increased to $742 billion compared to $739 billion for the same period in 2014, the MSRB said.

Minnesota sells G.O.s

Topping the day’s primary action, the State of Minnesota hit the market with $1,086,810,000 of series 2015 general obligation bonds in five tranches. The deal was downsized from $1,094,695,000.

The deal included $368,225,000 of series 2015A various-purpose bonds, $310 million of series 2015B state trunk highway bonds, $7.2 million of series 2015C taxable various-purpose bonds, $386,495,000 series 2015D various-purpose refunding bonds and $14.89 million of series 2015E state trunk highway refunding bonds.

The 2015A bonds are due 2016 to 2035 with 2% to 5% coupons and 0.254% to 2.94% yields.

The 2015B bonds are due 2016 to 2035 with 2.95% to 5% coupons and 0.27% to 3.46% yields.

The 2015C bonds are due 2016 to 2025 with 1% to 3% coupons and yields from 0.45% to 3%.

The 2015D bonds are due 2016 to 2027 with 5% coupons.

The 2015E bonds are due 2016 to 2027 with 2% to 5% coupons. The full pricing terms were still being determined Wednesday evening.

The bonds were sold competitively. Citigroup Global Markets Inc. won the 2015A bonds at a 2.93% true interest cost, and BofA Merrill Lynch took the 2015B bonds at a 2.88% TIC. The 2015C bonds were won by Wells Fargo Bank, NA at a 2.43% TIC, and Barclays took the 2015D bonds at a 2.18% TIC. The 2015E bonds were won by Robert W. Baird & Co. Inc. at a 2.15% TIC.

Janelle Tummel, spokeswoman for the Minnesota Treasurer’s Office, said Wednesday that the state has the option to sells its G.O. debt on a competitive or negotiated basis, but often chooses competitive sales.

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

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