Amid a backdrop of weakness in the municipal secondary market, participants focused on new issues as they began to digest the large slate of supply on tap this week.The Puerto Rico Sales Tax Financing Corp. increased its planned $3.5 billion deal set for today by $1 billion to $4.5 billion. The deal is slated to be priced for institutional investors by Citi today. Retail pricing details were unavailable, but the multi-faceted structure consists of current interest serial bonds maturing from 2014 to 2020, term bonds in 2024, 2039, 2042 and 2044, capital appreciation bonds from 2021 to 2036, and conversion bonds due from 2017 to 2022 and in 2040. The bonds are rated A2 by Moody's Investors Service, A-plus by Standard & Poor's, and A by Fitch Ratings.
Goldman, Sachs & Co. priced $351 million of special tax revenue refunding bonds for the Pennsylvania Intergovernmental Cooperation Authority. The bonds mature from 2010 through 2023, with yields ranging from 1.60% with a 2.5% coupon in 2011 to 4.36% with a 5% coupon in 2023. Bonds maturing in 2010 will be decided via sealed bid. The bonds, which are callable at par in 2019, are rated Aa3 by Moody's and AA by both Standard & Poor's and Fitch.
JPMorgan priced $330.6 million of general obligation bonds for Texas in three series. Bonds from the $223.8 million Series C-1 mature from 2010 through 2029, with term bonds in 2034 and 2039. Yields range from 1.25% with a 3% coupon in 2011 to 5.03% with a 5% coupon in 2039. Bonds maturing in 2010 will be decided via sealed bid.
Bonds from the $57.9 million Series C-2 mature from 2010 through 2023, with yields ranging from 1.25% with a 4% coupon in 2011 to 4.13% with a 4% coupon in 2023. Bonds maturing in 2010 will be decided via sealed bid. And bonds from the $48.9 million Series D mature from 2020 through 2029, with a term bond in 2035. Yields range from 3.70% with a 5% coupon in 2020 to 5.01% with a 5% coupon in 2035. All the bonds are callable at par in 2019, The credit is rated Aa1 by Moody's, AA by Standard & Poor's and AA-plus by Fitch.
Merrill Lynch & Co. priced $210 million of GO taxable Build America Bonds for Clark County, Nev., in two series. BABs from the $150 million series mature from 2009 through 2024, with term bonds in 2029 and 2038. Yields range from 2.69% in 2009, or 1.77% after the 35% federal subsidy, to 7.25% in 2038, or 4.71% after the federal subsidy, all priced at par. The bonds were priced to yield between 140 and 260 basis points over the comparable U.S. Treasury yields.
The $60 million series of BABs matures from 2010 through 2024, with a term bond in 2029. Yields range from 2.69% in 2010, or 1.77% after the 35% federal subsidy, to 7.05% in 2029, or 4.58% after the 35% federal subsidy, all priced at par. The bonds were priced to yield between 140 and 240 basis points over the comparable U.S. Treasury yields. All bonds are callable at par in 2019. The credit is rated Aa1 by Moody's and AA-plus by Standard & Poor's.
In the competitive new-issue market, Washington competitively sold $391.3 million of various purpose GO refunding bonds to Goldman Sachs, with a true interest cost of 3.68%. Pricing information was not available by press time. The bonds are slated to mature from 2010 through 2024, and are callable at par in 2019. The credit is rated Aa1 by Moody's, AA-plus by Standard & Poor's, and AA by Fitch.
Morgan Stanley priced $100.6 million of pollution control revenue refunding bonds for Texas' Matagorda County Navigation District No. 1. The bonds, which mature in 2029, yield 6.30% priced at par. The bonds, which are callable at 102 in 2019, declining to par in 2021, are rated Baa2 by Moody's, BBB by Standard & Poor's, and BBB-plus by Fitch.
Traders said tax-exempt yields were higher by two or three basis points.
"There's not much trading going on, but it's noticeably weaker," a trader in Los Angeles said. "We were kind of unchanged, then we were a bit weaker, then we were down maybe even four or five basis points, but we kind of rebounded slightly in the latter stages. I'd say we're off two or three basis points overall."
"We're cheapening up some, but it's quiet," a trader in New York said. "The secondary is pretty light, but things are coming a bit cheaper. I'd say two, maybe three basis points in spots, but all in all, things were pretty focused on the new issue today, not too much going on in the secondary, and I'd expect it to pretty much stay that way the rest of the week."
The Treasury market was mixed yesterday. The yield on the benchmark 10-year note, which opened at 3.87%, was quoted near the end of the session at the same level. The yield on the two-year note was quoted near the end of the session at 1.32% after opening at 1.40%. The yield on the 30-year bond, which opened at 4.61%, was quoted near the end of the session at 4.66%.
As of Monday's close, the triple-A muni scale in 10 years was at 80.1% of comparable Treasuries, according to Municipal Market Data. Additionally, 30-year munis were 101.1% of comparable Treasuries. Also, as of the close Monday, 30-year tax-exempt triple-A general obligation bonds were at 103.8% of the comparable London Interbank Offered Rate.
In economic data released yesterday, merchant wholesalers posted a 1.4% decrease in inventories in April, while sales slumped 0.4% in the month. Inventories of merchant wholesalers slid to $405.4 billion, following a revised 1.8% decrease to $411.1 billion in March. Meanwhile, sales of merchant wholesalers fell to about $309.4 billion, following February's unrevised 2.4% decrease to $310.7 billion. Economists polled by Thomson Reuters predicted a 1.1% decrease in wholesale inventories.
