Market Close New Jersey EDA Repricing Wire Shows Yield Increase

The New Jersey Economic Development Authority's repricing wire for its $599.8 million two-part issuance shows the yield for the $539.8 million of school facilities construction refunding bonds maturing in five years was raised from Wednesday morning, when the deal was originally priced.

The yield for the 5% coupon maturing in 2019 is 1.82%, compared to 1.77% this afternoon. The amount of five-year bonds issued is still $136.5 million the same as listed in the preliminary pricing wire.

"Demand must have been limited …they cut levels 5 bps for the 5s," Randy Smolik, senior market analyst at Thomson Reuters, said in an email.

Yields for the $539.8 portion of the deal range from 1.45% for the 5% coupon maturing in 2018 to 3.87% for the 5% coupon in 2031.

The second $60 million of school facilities construction bonds yields ranged from 3.95% for the 5% coupon in 2032 to 4.17% on the 4% coupon in 2035. Bank of America Merrill Lynch brought the deal to market, and it is rated A1 by Moody's Investors Service and A by Standard & Poor's.

There is an optional call at par for both sections in 2024.

The New Jersey Economic Development Authority's preliminary official statement dated April 10 showed the size of the refunding bond sale was increased to $537.8 million from $400 million.

The statement also revealed the New Jersey Development Authority planned to issue $625 million federally taxable school facilities construction refunding bonds. Thomson Reuters' Municipal Market Monitor's Dalcomp Neogtiated Calander showed that these bonds were priced up to $632 million and were scheduled to come to market on Wednesday. A spokeswoman for Bank of America ML said in an email that the bank declined to comment on the deal.

Municipal bonds strengthened on the long-end after receiving weak economic data on Wednesday.

Yields for 10- to 22-year maturities fell one basis point, the 23-year slid two basis points, 24- to 27-year maturities dipped three basis points, and 28- to 30-years declined four basis points, according to Municipal Market Data.

"We saw some strength at the start of the day as that nasty new home sales number, and the manufacturing number came out," a trader in Virginia said.

New home sales fell sharply in March — 14.5% to a 384,000 annual rate from 440,000 in February — in contrast to analysts' projection of 455,000 sales.

Markit's U.S. manufacturing sample dipped to 55.4 for March compared to 55.5 in February. Analysts had predicted the manufacturing sample would rise to 56.3 in March. Also distressing, employment growth lagged behind other sectors at 53.8.

The plunge in March's new home sales is notable because the Federal Reserve had speculated that weakness seen in January and February was the result of severe weather and suggested the market might have been more positive than the numbers suggested. Wednesday's report indicated continued softness despite improved weather.

A trader in New York said he anticipated the number would have been stronger because of the nicer weather. "The weather has been better, you can actually do stuff outside," he said, and projected this low sales number will have an impact on municipal bonds.

"The market is certainly looking for something to react to," he said. "Every time we see something about the Ukraine the market reacts. Now it is just looking for something else to respond to, new home sales could do it."

Investors also said municipal bond prices were boosted slightly this morning because Treasury yields fell. The 10-year benchmark yield slipped two basis points to 2.70% and the two-year notes dropped seven basis points to 0.45%. The 30-year yield fell three basis points 3.47%.

"Treasuries drag munis with them," a trader in Chicago said.

The trader in Virginia said Treasuries' strengthening, and long muni yields' subsequent drop, was partially due to the crisis in the Ukraine.

"Munis tend to follow Treasuries, and I think you had some strength in Treasuries early this morning because of reports of Russian and Ukraine tensions present," he said. "There was significant late day sell-off Thursday right before Easter break. After this weekend though, and early this week, it seems the situation is not fully defused."

Raymond James & Associates will offer to retail $150 million of residential finance program non-alternative minimum tax and alternative minimum tax bonds for the Tennessee Housing Development Agency.

The $26 million of alternative minimum tax residential finance program bonds were priced at par to yield from 0.65% in 2016 to 1.10% in 2017. Two maturities in 2015 will be sold by sealed bids. Retail orders were unavailable for bonds maturing in 2039. The bonds are callable at par in 2024.

The $119.5 million of non-alternative minimum tax residential finance program bonds were priced at par to yield from 1.20% in 2018 to 4.05% in 2034. Retail orders were unavailable for bonds maturing in 2039. The bonds are callable at par in 2024.

The $4.5 million of residential finance program bonds were priced at par to yield from 0.55% in 2016 to 0.95% in 2017. A 2015 maturity will be sold by sealed bid. This series does not have a call option. The deal is rated Aa1 by Moody's and AA-plus by S&P.q

In the competitive market, JP Morgan Securities won the bid for $225 million of taxable general obligation working cash notes for the Regional Transportation Authority of Illinois. The GOs are rated AA by Fitch.

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