Health and Higher Education Authorities' bonds are dominating both the primary and the secondary muni markets Thursday morning.
Investors said they think the $127.3 million Maryland Health and Higher Education Facilities Authority's refunding revenue bonds for its Anne Arundel Health System is one of the most attractive deals in the primary.
The top two most actively traded Cusips according to EMMA are the Health and Education Facilities Authority of Missouri's health facilities revenue 4.25s of 2048 and 4s of 2045. Traders acknowledged part of the reason the bonds are trading so actively is because they just became free to trade, but also because investors are genuinely interested in the credit itself.
"It's difficult to get Maryland credits that carry yield," a trader in the south said. "They issue general obligation bonds frequently, but those are triple-A any everyone wants them, so even after the bonds are purchased they are usually repriced lower and lower."
The Maryland Health and Higher Educational Facilities Authority bonds are rated A3 by Moody's Investors Service, and A-minus by S&P and Fitch.
Yields on the bonds ranged from 0.22% with a 2% coupon in 2015 to 3.84% with a 5% coupon in 2039.
Citigroup is the deal's managing underwriter, the bonds can be called in 2024 and they have sinking funds on term bonds in 2034, and two in 2039.
Traders said they are looking at the Missouri bonds for the same reason. Health and some education credits, particularly higher education securities, are typically higher yielding than state's GOs or utility bonds.
Investors said the Missouri bonds were attractive in particular because the bonds likely carried so much yield because Mercy Health's outlook was recently revised by both Moody's and S&P to negative from stable. Moody's rated the bonds Aa3 and S&P AA-minus.
"It's why the long bonds are trading so much," a trader in Chicago said. "People want yield, and these Mercy Health bonds are giving it to them."
The 4.25s of 2048 are trading at a high yield of 4.44% and a low of 4.23% according to EMMA. The bonds are being bought in both odd lot and block trades.
The 4s in 2045 are trading between a high of 4.30% and a low of 4.09% and they are also trading in both odd lot and block trades.
Primary
Citigroup won the bid for the $500 million Maryland GO consolidated public improvement bonds. These bonds are rated triple-A by the three major rating agencies, and carry yields from 0.16% with a 5% coupon in 2015 to 3.11% with a 4% coupon in 2034.
The bonds can be called at par in 2024.
A second $321.9 million part of the deal is also scheduled for auction on Thursday.
Bank of America Merrill Lynch won the bid on the $141.6 million part of a $250.5 million total Massachusetts Water Resources Authority general revenue and general revenue refunding bond deal.
The bonds' yields range from 0.88% with a 5% coupon in 2018 to 3.71% with a 4% coupon in 2041.
These bonds earned ratings of Aa1 from Moody's, and AA-plus from S&P and Fitch. They can be called at par in 10 years.
Scales
The muni sell-off continued on Thursday with yields on bonds maturing in six to eight years rising as much as one basis point, according to Municipal Market Data's triple-A scale. Yields on bonds maturing in nine to 30 years increased as much as two basis points.
The rest of the curve held steady.
Treasuries also started weakening on Thursday with the two-year note yield rising by two basis points to 0.54%, the 10-year by one basis point to 2.37%, and the 30-year by three basis points to 3.09%.
