The municipal market firmed slightly Tuesday as Illinois accelerated pricing its $1.5 billion tobacco bond sale in response to high demand for the debt during Monday’s retail order period.
“The market has firmed up and I think retail interest is still very strong,” said Bill Walsh, president of Hennion & Walsh, a retail broker. “You’re seeing a little bit better bid. … It’s been a good buying opportunity for the individual investor.”
In the new-issue market Tuesday, Citi priced $1.5 billion of tobacco settlement revenue bonds for Illinois’ Railsplitter Tobacco Settlement Authority. The deal, which was expected to be priced Wednesday, was moved up a day after a strong retail order period Monday in which substantially more than the allotted $300 million was sold to retail investors, according to market sources.
The bonds mature from 2012 through 2021, with term bonds in 2023, 2024, and a split term maturity in 2028. Yields range from 2.20% with a 3% coupon in 2012 to 6.20% with a 6% coupon in 2028.
The bonds are callable at par in 2021, except bonds maturing in 2024, which are callable at par in 2016. The credit is rated A by Standard & Poor’s and BBB-plus by Fitch Ratings.
Additionally, market sources said Citi delayed its $840 million Port Authority of New York and New Jersey offering until Wednesday due to the acceleration of the Illinois tobacco pricing.
The Municipal Market Data triple-A scale yielded 2.79% in 10 years Tuesday, three basis points lower than Monday’s 2.82%, while the yield on the 20-year scale also fell three basis points to 3.94%. The scale for 30-year debt followed suit, declining to 4.28% from Monday’s 4.31%.
“We’re getting a little bit of a bump on the long end,” a trader in New York said. “People are mostly focusing on the primary.”
Tuesday’s triple-A muni scale in 10 years was at 99.6% of comparable Treasuries and 30-year munis were at 103.9%, according to MMD.
Meanwhile, 30-year tax-exempt triple-A general obligation bonds were at 111.7% of the comparable London Interbank Offered Rate.
The Treasury market showed mild gains Tuesday. The benchmark 10-year note finished at 2.81% after opening at 2.82%. The 30-year bond finished at 4.13% after opening at 4.14%. The two-year note finished at 0.47% after opening at 0.51%.
Elsewhere in the new-issue market Tuesday, JPMorgan priced $492.7 million of taxable Build America Bonds for the Los Angeles Department of Water and Power.
The BABs mature in 2041 and 2050, yielding 7.003% and 6.603%, respectively, or 4.55% and 4.29% after the 35% federal subsidy.
The bonds were priced to yield 290 and 250 basis points over the 30-year Treasury yield, respectively, and contain a make-whole call at Treasuries plus 40 basis points.
The credit is rated Aa2 by Moody’s Investors Service, AA by Standard & Poor’s, and AA-plus by Fitch.
Wells Fargo Securities took indications of interest on $672.3 million of taxable and tax-exempt debt for Ohio’s American Municipal Power Inc.
Bonds from the $609.4 million series of taxable BABs mature from 2020 through 2022 and in 2027, 2035, and 2050. The bonds are priced to yield between 215 and 287.5 basis points over corresponding Treasury yields.
Bonds from the $38.4 million series of traditional taxable bonds mature from 2016 through 2020, and are priced to yield between 200 and 240 basis points over corresponding Treasury yields.
Bonds from the $20 million series of taxable clean-renewable energy bonds mature in 2029 and are priced to yield 235 basis points over the 30-year Treasury yield.
Also, bonds from the $4.5 million tax-exempt series mature in 2020 and are priced to yield 4.00% with a 5% coupon.
The credit is rated A3 by Moody’s and A by Standard & Poor’s and Fitch.
Wells Fargo also priced $131 million of waterworks and sewer system refunding and capital improvement revenue bonds for Charleston, S.C.
The bonds mature from 2012 through 2030, with term bonds in 2035, 2036, and 2041. Yields range from 0.61% with a 5% coupon in 2012 to 4.55% with a 5% coupon in 2041.
The bonds, which are callable at par in 2021, are rated Aa1 by Moody’s, AAA by Standard & Poor’s, and AA-plus by Fitch.
Knoxville, Tenn., competitively sold $70 million of taxable BABs to Ramirez & Co. at a true interest cost of 3.76%.
The BABs mature from 2012 through 2018 and from 2021 through 2027, with term bonds in 2030, 2035, and 2040. Yields range from 2.50% with a 2.74% coupon in 2015, or 1.63% after the 35% federal subsidy, to 6.10% priced at par in 2040, or 3.97% after the subsidy. Bonds maturing from 2012 through 2014, from 2021 through 2023, and in 2030 and 2035 were not formally re-offered.
The bonds are callable at par in 2021, except for those maturing in 2040, which are callable at par in 2023. The credit is rated Aa2 by Moody’s and AA-plus by Standard & Poor’s.
In economic data released Tuesday, consumer confidence surged ahead of economist expectations in November, climbing to 54.1 from a level of 49.9 the previous month.
Economists predicted the index of consumer attitudes would be 52.0. The October headline index originally was reported as 50.2.
The Chicago Purchasing Managers’ Business Barometer rose to 62.5 in November from 60.6 in October. Index readings below 50 signal a slowing economy, while levels above 50 suggest expansion.
Economists predicted a 60.0 reading for the seasonally adjusted indicator.
