The municipal market was unchanged to slightly firmer yesterday, amid a hefty slate of new issuance in the primary.
“We started off somewhat flat, but there was a bit of firmness creeping into the market as the day wore on,” a trader in New York said. “We’re maybe flat to down a basis point or two in spots.”
“I think the market is focused on new issuance. It’s a low-rate environment, not attractive enough for retail,” a trader in Los Angeles said.
In the new-issue market yesterday, the New York City Transitional Finance Authority sold $1.04 billion of future tax-secured bonds priced by senior book-runner Bank of America Merrill Lynch.
The $342.1 million Subseries G-1 taxable Build America Bonds mature serially from 2014 through 2020, and in 2031 and 2032, with term bonds in 2030, 2036 and 2040. Yields range from 2.662% priced at par in 2014, or 1.73% after the 35% federal subsidy, to 5.467% priced at par in 2040, or 3.55% after the subsidy.
The bonds were priced to yield between 50 and 143 basis points over the comparable Treasury yield and contain a make-whole call at Treasuries plus 20 basis points. Bonds maturing in 2031 and 2032 are callable at par in 2020, and are subject to a make-whole call at Treasuries plus 20 basis points prior to the call.
A $250 million series of taxable subordinate bonds matures in 2027, yielding 5.267% priced at par. The bonds were priced to yield 95 basis points over the comparable Treasury yield, and contain a make-whole call at Treasuries plus 15 basis points.
A $335.4 million series of tax-exempt debt matures from 2011 through 2027, with yields ranging from 0.51% with a 2% coupon in 2011 to 3.88% with a 5% coupon in 2027. The bonds are callable at par in 2020.
Bonds from a $44 million tax-exempt series mature from 2010 through 2021, with yields ranging from 0.51% with a 2.5% coupon in 2011 to 3.47% with a 3.5% coupon in 2021. Bonds maturing in 2010 were decided via sealed bid. The bonds are callable at par in 2020.
The TFA also competitively sold $70 million of taxable debt to Wells Fargo Securities, maturing in 2012, 2013, and 2016. Pricing information on the bonds was not available at press time. An additional $19.8 million taxable competitive series was sold to Wells Fargo, maturing in 2011 with a 2.5% coupon. The bonds were not formally re-offered.
The deal is rated Aa1 by Moody’s Investors Service, AAA by Standard & Poor’s, and AA-plus by Fitch Ratings.
Citi priced $880.6 million of metropolitan highway system revenue bonds for the Massachusetts Department of Transportation. The bonds mature from 2011 through 2027, with term bonds in 2029, 2032, and 2037. Yields range from 0.86% with a 2% coupon in 2011 to 4.81% with a 5% coupon in 2037.
The deal’s pricing remained steady from Monday’s retail yield levels. The bonds, which are callable at par in 2020, are rated A3 by Moody’s, A by Standard & Poor’s, and A-plus by Fitch.
Citi priced $192.6 million of Dulles Toll Road second senior-lien revenue bonds for the Metropolitan Washington Airports Authority in two series. Bonds from the $54.8 million series of capital appreciation bonds mature in 2037. Bonds from the $137.8 million series of convertible CABs mature in 2044. Pricing information was not available by press time.
Morgan Stanley priced $150 million of taxable Dulles Toll Road revenue BABs for the MWAA. The BABs mature in 2047, yielding 8.00% priced at par, or 5.20% after the 35% federal subsidy. The bonds were priced to yield 367 basis points over the comparable Treasury yield.
The credit is rated Baa2 by Moody’s and BBB by Standard & Poor’s. The deal had been planned for last week and was delayed due to market volatility.
The Treasury market showed gains yesterday. The benchmark 10-year note finished at 3.39% after opening at 3.49%. The 30-year Treasury bond was quoted near the end of the session at 4.26% after opening at 4.36%. The two-year note yield finished at 0.76% after opening at 0.80%.
The triple-A muni scale yielded 2.90% in 10 years yesterday, two basis points lower than Monday’s level, and much stronger than the late March level of 3.09%, according to Municipal Market Data. The 20-year yield was 3.72%, two basis points lower than Monday’s reading, while the scale yielded 4.02% in 30 years, also two basis points lower than Monday.
Monday’s triple-A muni scale in 10 years was at 83.9% of comparable Treasuries and 30-year munis were at 92.9%, according to MMD, while 30-year tax-exempt triple-A general obligation bonds were at 97.8% of the comparable London Interbank Offered Rate.
In economic data released yesterday, the producer price index in April unexpectedly declined by 0.1%, led lower by energy prices. Core producer prices, excluding food and energy costs, rose 0.2%, the sixth consecutive monthly increase. Economists expected total producer prices and core prices to each rise 0.1%, according to the median estimate from Thomson Reuters. Producer prices rose 0.7% in March, unrevised from the initial report.
Priti Patnaik contributed to this column.
