The municipal market opened strong Thursday morning, following strengthening overnight Treasury bidding activity, said a trader based in the Midwest.
Bidding was particularly strong in the belly of the curve, with yields for seven- to 10-year maturities falling by as much as two basis points in morning trading, according to Municipal Market Data's triple-A scale. Yields held steady in the front end and declined by one basis point in 11 years and beyond.
"There's a much better tone to the market today," said the trader. "There's better trading after opening up stronger with much more customer interest thanks to the overnight Treasury movement."
Treasuries strengthened through Thursday morning, with yields falling by two basis points for the two-year note, the 10-year and the 30-year to 0.46%, 2.45%, and 3.25% respectively.
Capturing the market's strength, the Florida Board of Education deal sold successfully, with a structure aimed for retail investors in the long end.
"With the 3s in the long end, that's a retail coupon," said the Midwest trader, "Those are some very discounted bonds targeted to the retail audience that's been demanding them."
Citigroup won the bid for the $114.53 million Florida Board of Education public education capital outlay refunding bonds. The bonds have yields ranging from 0.11% with a 5% coupon in 2015 to 3.10% with a 3% coupon in 2029.
"A 3% coupon helps the borrower with very cheap borrowing costs and finds the retail customer willing to do that," the trader added.
The bonds are rated Aa1 by Moody's Investors Service and triple-A by Standard & Poor's and Fitch Ratings. The bonds contain a call at par in 2024.
Wells Fargo Securities received the written award on a $111.57 million Charleston Education Excellence Financing Corporation, S.C., installment purchase revenue refunding bonds with final yields ranging from 1.40% with a 5% coupon in 2019 to 3.20% with a 5% coupon in 2031.
"The deal repriced with five to nine basis point bumps along the curve, people couldn't get enough of it," said the trader. "It's a strongly rated school district, so it was no surprise."
The bonds can be called in 2024 at par, and earned ratings of Aa2 from Moody's and AA from S&P.
The education sector has been "hot credit" for municipal bond buyers this summer, as supply has shrunk and tightened spreads.
