NEW YORK – The tax-exempt market has proven it can handle what could turn out to be one the year’s largest weeks of new issuance. Traders noted plenty of demand for the huge amount of supply this week and buyers are eating up bonds.
“There is still hefty appetite out there,” a New Jersey trader said. “Keep in mind there is $40 billion in coupon payments and redeemed bonds that need to be replace.”
He added deals this week have gone surprisingly well. “Connecticut was priced 38 basis points through the Municipal Market Data scale and was well-received,” he said, referring to the $523.7 million general obligation bond deal. “It surprised a number of people who were told it may come cheaper, but they ended up bumping the deal to a 38 basis point spread.”
The $1.8 billion Dormitory Authority of the State of New York general-purpose personal income tax deal went well too. “It just got done and they bumped that scale,” the trader said. “So there is plenty of money to be put to work here. And a lot of people need to replace bonds that are called and there is interest coming in they need to put to work.”
Munis are primarily being drive by supply and demand, as well as Treasuries. “The bottom line is munis are still very attractive to Treasuries. There is a little uneasiness when investing at equities at this point. So deals keep coming and keep getting done. And I don’t see that changing.”
Munis were mixed Wednesday as the yield curve steepened, according to the Municipal Market Data scale. Yields inside three years were steady while the four- and five-year yield rose one basis point. The six- and seven-year yields were steady while yields outside eight years fell as much as two basis points.
On Tuesday, the 10-year yield rose one basis point to 1.91% while the 30-year yield jumped two basis points to 3.20%. The two-year was steady at 0.32% for the eighth straight session.
Treasuries were stronger Wednesday after a weaker session Tuesday. The benchmark 10-year yield dropped five basis points to 1.62% while the 30-year yield fell three basis points to 2.74%. The two-year yield fell one basis point to 0.30%.
In the negotiated market, Goldman, Sachs & Co. priced and repriced for institutions $1.8 billion of Dormitory Authority of the State of New York general-purpose New York personal income tax revenue refunding bonds. The bonds are rated AAA by Standard & Poor’s and AA by Fitch Ratings.
Yields ranged from 1.08% with 1.5% and 5% coupons in a split 2017 maturity to 3.60% with a 4% coupon in 2033. The bonds are callable at par in 2022. Yields were lowered as much as three basis points from preliminary pricing.
Loop Capital Markets priced $143 million of Forest Preserve District of Cook County, Ill., general obligation bonds in three series, rated Aa2 by Moody’s Investors Service and AA by Standard & Poor’s and Fitch.
Yields on the first series, $31.6 million of GO unlimited tax refunding bonds, ranged from 0.79% with a 3% coupon in 2014 to 2.93% with a 5% coupon in 2022.Bonds maturing in 2012 and 2013 were offered via sealed bid. The credits are callable at par in 2022.
Yields on the second series, $54.9 million of GO limited tax project and refunding bonds, ranged from 0.79% with a 3% coupon in 2014 to 4.04% with a 5% coupon in 2037. Credits maturing in 2012 and 2013 were offered via sealed bid. The bonds are callable at par in 2022.
Yields on the third series, $56.5 million of GO unlimited tax bonds, ranged from 0.79% with a 3% coupon in 2014 to 4.04% with a 5% coupon in 2037. Credits maturing in 2013 were offered via sealed bid. The bonds are callable at par in 2022.
In the competitive market, the Port Authority of New York and New Jersey auctioned $600 million of revenue bonds in two pricings – each $300 million.
The first, $300 million short-term notes, is rated M1G-1 by Moody’s, SP-1-plus by Standard & Poor’s, and F1-plus by Fitch. Pricing details were not available by press time.
Citi won the bid for the $300 million of revenue bonds rated Aa2 by Moody’s and AA-minus by Standard & Poor’s and Fitch. The bonds mature between 2018 and 2032. Prices were not available.
