With the tax-exempt market seemingly stabilized after a whipsaw week, several borrowers chose to dip their toes into the primary Monday.
Those braving the waters included some names that decided discretion was the better part of valor when staring down the historic selloff the muni market just endured.
In the week’s largest scheduled pricing, RBC Capital Markets came to market with $384.3 million of combined lien mass transit sales tax appropriation refunding bonds for the Bi-State Development Agency of the Missouri-Illinois Metropolitan District, rated Aa3 by Moody’s Investors Service and AA-plus by Standard & Poor’s.
Yields ranged from 0.35% with a 3% coupon in 2014 to 4.792% with a 4.75% coupon in 2052. The bonds are callable at par in 2022 except for those maturing in 2028, 2046, 2048, 2050, and 2052 which are callable at par between 2014 and 2018.
Yields were lowered as much as five basis points from pricing Monday morning.
With the rout and subsequent rally having given way to the calm brought by a holiday-shortened week, traders said the influx of July 1 reinvestment money should help support the market.
“There’s a lot of money to put to work out there,” a New York trader said. “It’s been quiet but you’re able to turn over what you bring in.”
“There are huge redemptions this month, especially today,” a New Jersey trader said. “A lot of bonds are getting called, there is money to be spent, and I would think that bumps the market up in the short term.”
Amid this environment, Citi issued a pre-marketing wire for the Louisiana Tobacco Settlement Financing Corp.’s $663.8 million asset-backed refunding, one of the largest deals yanked from the calendar during the selloff. However, Louisiana Commissioner of Administration Kristy Nichols cautioned that the wire was simply to test interest from potential buyers and did not represent a commitment to come to market this week.
“The purpose is to obtain solid indications from potential buyers about whether they would buy the bonds and at what interest rates. The premarketing in no way binds the corporation to proceed with the pricing [Monday] or [Tuesday],” Nichols said. “The corporation could still decide to wait to until a later date for the actual pricing based on the feedback from potential investors.”
Pre-marketing yields ranged from 1.32% with a 5% coupon in 2016 to 5.35% with a 5.25% coupon in 2035. Bonds maturing between 2024 and 2035 are callable at par between 2015 and 2023. Spreads ranged from 50 basis points to 170 basis points over Friday’s Municipal Market Data scale. The deal is rated BBB-plus by Standard & Poor’s and Fitch Ratings.
Just $991 million of issuance had been expected in the primary market this week, with the Securities Industry and Finance Markets Association recommending an early close Wednesday at 2 p.m. Eastern and a full close Thursday in observance of Independence Day. The projection is down significantly from last week’s revised $6.09 billion issued.
RBC Capital Markets priced for retail investors $336.3 million of New York’s Metropolitan Transportation Authority revenue bonds, A2 by Moody’s and A by Standard & Poor’s and Fitch. Institutional pricing is expected Tuesday.
Yields ranged from 0.45% with a 4% coupon in 2014 to 4.70% with a 5% coupon in 2043. The bonds are callable at par in 2023. Bonds maturing in 2013 were offered via sealed bid.
Ramirez & Co. priced $111.9 million of triple-A Ohio Water Development Authority revenue bonds. Yields ranged from 1.61% with a 5% coupon in 2018 to 2.82% with a 5% coupon in 2023. Bonds maturing in 2013 and 2014 were offered via sealed bid.
Yields were lowered as much as seven basis points from retail pricing Monday morning and finished with spreads ranging from 19 basis points to 32 basis points above Friday’s Municipal Market Data scale.
As most traders were focused on the primary, the secondary market lagged and very few bonds traded that were out for bid. “Things are definitely calmer,” the New Jersey trader said. “The bid-to-offer is still wide although not as wide as last week. Only six to seven percent of items out for the bid are trading.”
In the secondary market, trades compiled by data provider Markit showed a mix of strengthening and weakening.
Yields on Maine Municipal Bond Bank 5s of 2025 fell five basis points to 3.15% and Arizona Health Facilities Authority 5s of 2043 dropped three basis points to 5.13%.
Yields on Kentucky State Property and Buildings Commission 3s of 2030 jumped five basis points to 4.55% and Orlando, Fla., Utilities Commission 5s of 2023 increased four basis points to 2.98%.
Monday, yields on the Municipal Market Data scale ended mostly steady across the curve. The 10-year and 30-year yields were steady for the third session at 2.56% and 3.83%, respectively. The two-year was flat at 0.50% for the fourth session.
Yields on the Municipal Market Advisors scale ended mostly flat as well. The 10-year and 30-year yields were flat at 2.72% and 3.95%, respectively. The two-year was steady at 0.53% for the third session.
Treasuries were firmer on longer-dated bonds. The benchmark 10-year yield fell two basis points to 2.49% and the 30-year yield slid four basis points to 3.48%. The two-year was steady at 0.36%.
As long as the market continues to trade with an even tone, analysts at Interactive Data say more deals could hit the primary market. “Spreads have tightened selectively of late, but the marketplace is still characterized by wider than normal bid-ask,” they said. “If the stabilization of the past several sessions can hold, primary supply could ultimately see a boost from the re-emergence of recently postponed deals.”
