The $1.26 billion Texas Transportation Commission deal offered proof of the market's strength Thursday, pricing at slim spreads and even breaking through the Municipal Market Data triple-A 5% curve in some areas.
After a strong order period, the negotiated deal was priced to yield a range of 0.09% on a 2% coupon in 2015 through 3.10% on a 5% coupon in 2044, according to data provided by Ipreo. The issuance featured serialized bonds between 2015 through 2036 and two term bonds in 2039 and 2044 and most maturities held a 5% coupon, aside from a 2% coupon in 2015 and three 4% coupons in 2032, 2033 and 2034 that buyers specifically requested, said a southeast based traders.
Yields broke through the MMD scale on the front end of the curve, pricing as low as eight basis points under the MMD curve in 2018, according to Ipreo.
At midday the deal's 10-year was at a 10 basis point spread to MMD, but an afternoon repricing put the benchmark duration at just two basis points above the 2.12% MMD curve. The deal holds the ultra-high triple-A rating from all three major rating agencies: Moody's Investor Services, Standard & Poor's, and Fitch Ratings.
"It's pretty difficult to be surprised by this deal at this point," said a southeast-based trader. "It's triple-A, the supply environment, it all makes sense."
Traders pointed to Wednesday's firm Treasury market to explain some of the deal's interest and strength. The 10-year experienced its biggest yield drop on Wednesday evening since early January 2014, closing the day at 2.42%, approaching the lows of early September, according to Janney Capital Markets.
On Thursday Treasuries weakened across the curve, pulling back from the strength seen on Wednesday. Yields on the two-year climbed one basis point to 0.54% compared to Wednesday's market close, while the 10-and 30-year each softened two basis points to 2.44% and 3.15%, respectively.
Much of the strength in the Treasury market has spilled over into municipals, with scales tightening since the beginning of September. On Thursday, the belly of the curve strengthened while the front and long end held steady, according to the MMD triple-A 5% scale provided by TM3. Yields on bonds maturing between 2019 and 2020, 2025 through 2027, and 2035 through 2037 all fell one basis point while those maturing between 2021 through 2024 and 2028 through 2034 tightened two basis points, according to TM3. Bonds maturing between 2015 through 2018 and 2038 through 2044 remained unchanged.
MUNI MONEY FUND OUTFLOWS
Tax-exempt money market funds suffered another hit in the week ended Sept. 29 as $2.35 billion of outflows decreased total net assets to $252.74 billion, according to The Money Fund Report, a service of iMoneyNet.com.
The losses come on the heels of $1.11 billion of outflows in the previous week.
The average, seven-day yield for the 411 weekly reporting tax-exempt money market funds was unchanged at 0.01%, while the average maturity increased by one day to 42 days.
The total net assets of the 1,008 weekly reporting taxable money market funds meanwhile rose by $9.87 billion to $2.382 trillion in the week ended Sept. 30, which is down from inflows of $23.83 billion that poured into the market last week.
The average, seven-day yield for the taxable funds was steady at 0.01%, while the average maturity remained at 45 days.
The combined total net assets of the 1,419 weekly reporting money market funds increased to $2.635 trillion in the week ended Sept. 29 after the arrival of $7.53 billion.
