The municipal bond market strengthened for the ninth consecutive trading session Monday, benefiting from improvement in the Treasury market and limited new issue supply this week. New York City took advantage of demand, pricing $500 million of general obligation bonds in one of two retail order periods.
Traders said the offering was priced attractively for investors looking for a solid double-A-rated credit.
“It looks attractive to me,” a New Jersey trader said. “I’ve seen bonds as high as 35 basis points over and these are coming out at 40 to 42 basis points over,” he said, referring to the yield on the NYC GOs compared with Friday’s triple-A Municipal Market Data scale. “It’s a reasonable price for retail and there are some gives in spread because they are trying to sell about $500 million. So it’s priced right.”
Siebert Brandford Shank & Co. priced GOs for retail, rated Aa2 by Moody’s Investors Service and AA by Standard & Poor’s and Fitch Ratings. A second retail order period will be held Tuesday followed by institutional pricing Wednesday. The city on Wednesday will also issue a separate taxable competitive deal totaling $125 million.
In the deal Monday, yields on the first series of $300 million ranged from 0.80% with a 3% coupon in 2016 to 4.26% with a 5% coupon in 2033 and are callable at par in 2023. Bonds maturing in 2015 were offered via sealed bid. Portion of bonds maturing between 2026 and 2031 were not offered for retail. Bonds with 5% coupons maturing between 2022 and 2033 yielded 19 basis points to 22 basis points above Friday’s double-A Municipal Market Data scale.
Yields on the second series of $179 million ranged from 0.80% with a 4% and 5% coupon in a split 2016 maturity to 2.26% with a 4% and 5% coupon in a split 2020 maturity. Bonds with 5% coupons yielded six basis points to 16 basis points above Friday’s double-A MMD scale.
Yields on the third series of $20.2 million ranged from 0.60% with a 5% coupon in 2016 to 2.11% with a 5% coupon in 2020. In a sign of demand, most bonds on this series were priced richer than Friday’s double-A MMD scale, yielding between four and 14 basis points through the scale on bonds maturing between 2016 and 2019. Bonds maturing in 2020 yielded one basis point above the scale.
Overall light issuance this week is helping prop up the market. “It’s somewhat stronger and we are seeing a little more interest in terms of overall strength in the market,” the New Jersey trader said. “There is a fair amount of demand for high-grade specialty state paper from investment advisors and mutual funds.”
One trader in New York said the market was one to two basis points firmer with most activity in the 10-year spot. “There is also a fair amount of business on the long-end.”
In the secondary market, trades compiled by data provider Markit showed strengthening. Yields on New Jersey Tobacco Settlement Financing Corp. 4.625s of 2026 slid seven basis points to 5.85% and Connecticut 4s of 2021 fell four basis points to 2.45%.
On Monday, yields on the MMD scale ended as much as three basis points lower. The 10-year yield fell one basis point to 2.59% and the 30-year yield dropped three basis points to 4.17%. The two-year was steady at 0.36% for the second session.
