Municipal bond buyers trapped in a low-supply market this month are hoping $750 million of Illinois bonds scheduled for sale Thursday will present an opportunity for some yield.
While bond sales this week are set to touch as much as $7.5 billion, the most in more than a month, issuers like the state of California have been able to price bonds aggressively, offering bonds with lower returns than what traders want.
Illinois, with an A3 rating by Moody's Investors Service and A-minus rating from Standard & Poor's and Fitch, could be the answer. But with several deals already completed this year and pension reform underway, the issue may come pricier than buyers like, some traders said.
Spreads on Illinois bonds in the primary have narrowed this year, with a $250 million sale April 10 that came with a 10-year bond 95 basis points above the Municipal Market Data AAA scale. That compared with a spread of 129 basis points on a similar maturity in a sale in February.
Wells Fargo Securities will bring the $750 million of Illinois GOs, the largest negotiated deal of the week. The bonds will mature serially from 2015 to 2039.
Also in the negotiated market, Bank of America Merrill Lynch plans to issue $700.2 million of unemployment compensation obligation assessment revenue refunding bonds for the Texas Public Finance Authority. The bonds received a Aaa rating from Moody's and A-minus from both S&P and Fitch.
In the competitive market, the Virginia Public School Authority will issue $225 million of school financing refunding bonds on Thursday. The deal is rated AA1 by Moody's, and AA-plus by both S&P and Fitch.
Muni yields were mixed Thursday morning, with bonds maturing beyond 2024 sliding as much as one basis point. Yields on bonds on the intermediate part of the curve were steady, while those on the short-end were under review, according to the Municipal Market Data's triple-A scale.
BofA brought the third part of the $1.2 billion New Jersey Economic Development Authority deal to the market late Wednesday. Yields on the $626.4 million of taxable school facilities construction refunding bonds ranged from 0.499% in 2015 to 2.321% in 2018.
JP Morgan Securities brought $100 million of multi-family housing revenue bonds for the New York City Housing Development Corporation late Wednesday. The bonds were priced at par to yield from 0.25% in 2014 to 3.69% in 2024. The bonds are callable at par in 2023.
Treasuries weakened Thursday morning, with the 30-year yields and the two-year notes jumping one basis point each to 3.48% and 0.46%, respectively. The 10-year benchmark was unchanged at 2.70% from Wednesday's market close.
