Bay State RANs Roll into Market; Munis Steady

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Top quality municipal bonds finished unchanged on Wednesday, according to traders, as some of the week's biggest deals sold in the competitive arena.

Topping the competitive slate this week is the state of Massachusetts, which is coming to market with over $2 billion of bonds and notes.

On Wednesday, the Bay State competitively sold $1.5 billion of general obligation revenue anticipation notes in three separate offerings.

Eight groups with 13 bids won the $500 million of Series 2016A RANs. The winning bidders included JPMorgan Securities, Wells Fargo Securities, Bank of America Merrill Lynch, TD Securities, Citigroup, Goldman Sachs, Barclays Capital and Raymond James.

JPMorgan took $70 million with a bid of 2% and a premium of $622,299.99, an effective rate of 0.630865%; JPMorgan also $50 million with a bid of 2% and a premium of $452,000, an effective rate of 0.607764%; and JPMorgan took $30 million with a bid of 2% and a premium of $268,199.99, an effective rate of 0.623165%.

Wells Fargo took $50 million with a bid of 2% and a premium of $460,000, an effective rate of 0.583122%; Wells also took $50 million with a bid of 2% and a premium of $456,500, an effective rate of 0.593903%.

BAML took $50 million with a bid of 2% and a premium of $442,500, an effective rate of 0.637025%; BAML also took $25 million with a bid of 2% and a premium of $226,250, an effective rate of 0.606224%.

TD Securities took $50 million with a bid of 2% and a premium of $445,500, an effective rate of 0.627785%.

Citi took $25 million with a bid of 2% and a premium of $230,000, an effective rate of 0.583122%; Citi also took $25 million with a bid of 2% and a premium of $225,000, an effective rate of 0.613924%.

Goldman took $25 million with a bid of 2% and a premium of $228,000, an effective rate of 0.595443%.

Barclays took $25 million with a bid of 2% and a premium of $225,750, an effective rate of 0.609304%.

Raymond James took $25 million with a bid of 2% and a premium of $236,249.99, an effective rate of 0.544620%.

Seven groups with 11 bids won the $500 million of Series 2016B RANs. The groups included Williams Capital, Morgan Stanley, Goldman, JPMorgan, Jefferies, Barclays, Citi. Pricing information was not available.

Morgan Stanley won the $500 million of Series 2016C RANs with two bids: $350 million with a bid of 2% and a premium of $3,744,999.99, an effective rate of 0.698167% and $150 million with a bid of 2% and a premium of $1,611,000, an effective rate of 0.693300%.

The note deals are rated MIG1 by Moody's Investors Service, SP1-plus by S&P Global Ratings and F1-plus by Fitch Ratings.

On Thursday, the state will offer about $835 million of general obligation bonds in two separate sales. The bond deals are rated Aa1 by Moody's and AA-plus by S&P and Fitch.

Since 2006, the state has sold about $39.76 of notes and bonds, with the largest issuance occurring in 2014 when it sold about $4.89 billion of securities. The sales this week put 2016 issuance at $4.97 billion. The state's lowest issuance came in 2008, when it sold $2.29 billion.

Portland, Ore., competitively sold about $318 million of first and second lien sewer system revenue refunding bonds in two separate sales on Wednesday.

Citi won the $162.47 million of Series 2016B second lien sewer system revenue refunding bonds with a true interest cost of 1.37%. The deal was priced to yield from 0.50% with a 5% coupon in 2017 to 2.57% with a 2.50% coupon in 2033.

Morgan Stanley won the $155.43 million of Series 2016A first lien sewer system revenue refunding bonds with a TIC of 2.03%. Pricing information was not available.

The first lien bonds are rated Aa2 by Moody's and AA by S&P while the second lien bonds are rated Aa3 by Moody's and AA-minus by S&P.

The Beaumont Independent School District, Texas, sold $132.16 million of Series 2016 unlimited tax refunding bonds, which were won by BAML with a TIC of 2.61%.

The bonds were priced to yield from 0.56% with a 5% coupon in 2017 to 3% at par in 2036; a 2038 maturity was priced as 3s to yield about 3.02%. The deal is rated triple-A by Moody's and S&P and is insured by the Permanent School Fund guarantee program.

In the negotiated sector, BAML priced the Eastern Muni Water District, Calif.'s $124.81 million of Series 2016B water and wastewater revenue bonds.

The issue was priced to yield from 0.44% with a 2% coupon in 2017 to 2.33% with a 4% coupon in 2035. The deal is rated Aa3 by Moody's, AA by S&P and AA-plus by Fitch.

Goldman priced the Illinois Finance Agency's $122.01 million of Series 2016A revenue refunding bonds for DePaul University.

The issue was priced to yield from 1.05% with a 5% coupon in 2020 to 3.125% with a 3% coupon in 2037; a 2040 term bond was priced as 4s to yield 2.97%. The deal is rated A2 by Moody's and A by S&P and Fitch.

Citigroup priced the Florida Housing Corp.'s $110.85 million of taxable special program homeowner mortgage revenue bonds.

The $50.98 million of Series 2016A bonds were priced at par to yield 2.45% in a 2043 bullet maturity. The $59.87 million of Series 2016B bonds were priced at par to yield 2.55% in a 2043 bullet maturity. The deal is rated triple-A by Moody's.

Goldman received the written award on Birmingham, Ala.'s Waterworks Board's $435.39 million of senior water revenue refunding bonds Series 2016A and subordinate water revenue refunding bonds Series 2016B.

The $157.19 million of Series 2016A bonds were priced to yield 0.81% with a 5% coupon in 2020 and to yield from 1.15% with a 5% coupon in 2022 to 2.68% with a 4% coupon in 2038. A 2041 term bond was priced to yield 2.71% with a 4% coupon. The bonds are rated Aa2 by Moody's and AA by S&P.

The $278.2 million of Series 2016B bonds were priced to yield from 1.41% with a 5% coupon in 2023 to 2.79% with a 4% coupon and 2.54% with a 5% coupon in a split 2036 maturity. A term bond in 2043 was priced as 3s, 4s, and 5s to yield 3.13%, 2.88% and 2.63%, respectively in a triple-split maturity. The bonds are rated Aa3 by Moody's and AA-minus by S&P.

 

Secondary Market

The yield on the 10-year benchmark muni general obligation was unchanged from 1.40% on Tuesday, while the yield on the 30-year muni was steady from 2.11%, according to the final read of Municipal Market Data's triple-A scale.

U.S. Treasuries were little changed on Wednesday. The yield on the two-year Treasury rose to 0.76% from 0.75% on Tuesday, the 10-year Treasury yield was unchanged from 1.55% and the yield on the 30-year Treasury bond increased to 2.24% from 2.23%.

The 10-year muni to Treasury ratio was calculated at 90.0% on Wednesday compared to 90.3% on Tuesday, while the 30-year muni to Treasury ratio stood at 94.2% versus 94.6%, according to MMD.

 

N.Y. MTA $1B Hudson Yards Sale Gets A-minus

The New York Metropolitan Transportation Authority's $1.06 billion of Hudson Rail Yards Series 2016A trust obligations were rated A-minus by Kroll Bond Rating Agency. The rating outlook is stable.

Kroll said its rating evaluation of the long-term credit quality of the transaction focused on a legal framework [AA-minus], the nature of property tax/assessment revenue base [BBB-minus], economic base and demographics [AA-plus], revenue analysis [BBB], and debt service coverage and bond structure [A-plus].

"The KBRA rating category reflects the significant risk associated with the scale and complexity of the construction and development in the project area as well as elements of uncertainty in the timing of construction and the ultimate value of developments," Kroll said in a release. "This is partially offset by a flexible amortization schedule and a pledge of all revenues received under the ground leases to pay down the Series 2016A obligations."

The MTA is tentatively planning to sell the obligations in mid-September, with the proceeds of the sale going "to finance existing approved trust and commuter projects and to pay other financing costs associated with the monetization of the Hudson Rail Yard ground leases."

Last month, the MTA board authorized the offering to monetize a portion of the 99-year lease payments from Hudson Rail Yards commercial and residential development. The MTA will offer the obligations under a trust agreement with Wells Fargo Bank as custodian, most likely as a 40-year bond.

The MTA is one of the largest municipal issuers with nearly $37 billion of debt.

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