Munis Firm a Bit; Pennsylvania Offers $1B

The municipal market was slightly firmer yesterday amid light to moderate secondary trading, as Pennsylvania led the primary with $1 billion of issuance over two separate competitive sales.

“The focus is mainly on the new issues again, but we are definitely a little bit better,” a trader in Los Angeles said. “We’re probably not seeing more than two or three basis points improvement, but it’s solidly firmer, despite not overwhelming secondary trading. But activity is picking up some.”

“It’s feeling firmer again, but I’m not sure we’re going to be able to sustain these gains for too much longer,” a trader in New York said. “As far as today goes, we’re probably two basis points or so better, maybe three in spots. But there’s still not a ton trading on the Street.”

In the new-issue market yesterday, Pennsylvania competitively sold $548.9 million of taxable general obligation Build America Bonds to Bank of America ­Merrill Lynch with a true interest cost of 3.34%.

The bonds mature from 2022 through 2026, with a term bond in 2030. Coupons range from 4.5% in 2022, or 2.93% after the federal subsidy, to 5.35% in 2030, or 3.48% after the subsidy. None of the bonds were formally re-offered, and are callable at par in 2020.

Pennsylvania also competitively sold $451 million of tax-exempt GO debt to JPMorgan with a TIC of 2.52%.

The bonds mature from 2011 through 2021, with coupons ranging from 2% in 2011 to 5% in 2021. None of the bonds were formally re-offered, and are callable at par in 2020.

The credit is rated Aa1 by Moody’s Investors Service, AA by Standard & Poor’s, and AA-plus by Fitch Ratings.

The Treasury market showed some losses yesterday. The benchmark 10-year note finished at 3.37% after opening at 3.35%. The 30-year Treasury bond was quoted near the end of the session at 4.24% after opening at 4.22%.

The two-year note yield was quoted near the end of the session at 0.78% after opening at 0.73%.

The triple-A scale yielded 2.88% in 10 years yesterday, two basis points lower than Tuesday’s level, but still much stronger than the late March level of 3.09%, according to Municipal Market Data. The 20-year yield was 3.70%, two basis points lower than Tuesday’s reading, while the scale yielded 4.00% in 30 years, which was also two basis points lower than Tuesday.

Tuesday’s triple-A muni scale in 10 years was at 85.8% of comparable Treasuries and 30-year munis were at 94.4%, according to MMD, while 30-year tax-exempt triple-A general obligation bonds were at 97.8% of the comparable London Interbank Offered Rate.

Elsewhere in the new-issue market yesterday, JPMorgan priced $317 million of power revenue bonds for the Puerto Rico Electric Power Authority.

The bonds mature from 2021 through 2028, with yields ranging from 4.32% with a 4.25% coupon in 2021 to 4.80% with a 5.25% coupon in 2028.

The bonds are callable at par in 2020, except bonds maturing in 2025 and 2026, which are callable at par in 2015. The bonds are rated A3 by Moody’s and BBB-plus by both Standard & Poor’s and Fitch.

Kentucky’s Louisville and Jefferson County Metropolitan Sewer District competitively sold $226.3 million of sewer drainage system subordinated bond anticipation notes to JPMorgan with a TIC of 0.63%.

The Bans mature in 2011 with a 1.25% coupon in 2011, and were not formally re-offered. The credit is rated MIG-1 by Moody’s, SP-1-plus by Standard & Poor’s, and F1 by Fitch.

Morgan Stanley priced $143.9 million of electric revenue bonds for the North Carolina Municipal Power Agency No. 1 in two series.

Bonds from the $74.8 million Series A mature from 2014 through 2021, with yields ranging from 1.97% with a 4% coupon in 2014 to 3.75% with a 5% coupon in 2021. The bonds are callable at par in 2020.

Bonds from the $69 million Series B mature in 2020 and 2021, yielding 3.65% and 3.75%, both with 5% coupons. The bonds are callable at par in 2020.

The credit is rated A2 by Moody’s and A by both Standard & Poor’s and Fitch.

Suffolk County, N.Y., competitively sold $96.2 million of public improvement serial bonds to Citi with a net interest cost of 3.56%.

The bonds mature from 2011 through 2028, with yields ranging from 1.00% with a 2% coupon in 2013 to 4.00% priced at par in 2028. Bonds maturing in 2011, 2012, and 2020 were not formally ­re-offered.

The bonds, which are callable at par in 2019, are rated Aa2 by Moody’s and AA by both Standard & Poor’s and Fitch.

Morgan Stanley also priced $90 million of homeowner mortgage revenue bonds for the Florida Housing Finance Corp.

The bonds mature from 2012 through 2022, with term bonds in 2025, 2028, and 2029. Yields range from 1.05% priced at par in 2012 to 4.60% priced at par in 2029.

The bonds, which are callable at par in 2020, are rated Aaa by Moody’s.

In economic data released yesterday, the consumer price index unexpectedly dipped 0.1% on a seasonally adjusted basis in April, the first drop in more than a year as energy prices declined.

Core prices, excluding food and energy costs, were unchanged in April, the second consecutive month with no core price change.

For the 12 months ending in April, consumer prices rose 2.2%.

Economists expected April’s total consumer prices and core prices to increase 0.1%, according to the median estimate from Thomson Reuters. Consumer prices increased 0.1% in March.

For reprint and licensing requests for this article, click here.
MORE FROM BOND BUYER