Municipal bond market participants are waiting for California's big general obligation bond offering to be priced for institutions on Wednesday.
Primary Market
Morgan Stanley is set to price California's $1.9 billion of various purpose general obligation and GO refunding bonds for institutions after holding a retail order period on Tuesday.
The $550 million of various purpose GO bonds were priced for retail to yield from 0.61% with a 4% coupon in 2017 to 2.23% with a 5% coupon in 2024. A split 2045 term bond was priced as 4s and as 5s to yield 3.80% and 3.35%, respectively. A 2016 maturity was offered as a sealed bid.
The $1.35 billion of various purpose GO refunding bonds were priced for retail to yield from 0.61% with 2% and 3% coupons in a split 2017 maturity to 3.14% with a 5% coupon in 2035. The 2016 maturity was offered as a sealed bid.
The deal was rated Aa3 by Moody's Investors Service, AA-minus by Standard & Poor's and A-plus by Fitch Ratings.
About $1.35 billion from the sale will be used to refinance existing debt, with the remainder providing permanent financing for capital facilities or other voter-approved projects and public facilities.
Since 1995, the state of California has issued roughly $130.42 billion of debt. The highest issuance years were in 2007 and 2009, when it issued $12.19 billion and $23.18 billion, respectively. The Golden State saw lows issuance years in 1995 and 1996 of $1.25 billion and $660 million, respectively.
Barclays Capital is expected to price Guam's $404.87 million of Series 2015D business privilege tax refunding bonds on Wednesday.
Fitch affirmed its A-minus rating on the issue ahead of the sale.
The bonds are special limited obligations secured by a lien of 3% out of the 4% general business privilege tax levied on goods and services. The legal provisions are strong and provide sufficient insulation from general fund operations to result in a rating on the BPT bonds that is significantly higher than would be the case for a general obligation pledge, Fitch analysts said.
The BPT is collected and held outside of the general fund and transferred on a weekly basis to the trustee.
Bank of America Merrill Lynch is slated to price the Kentucky Economic Development Finance Authority's Series 2015A Next Generation Kentucky Information Highway Project senior revenue bonds on Wednesday, The issue is rated Baa2 by Moody's and BBB-plus by Fitch.
JPMorgan is set to price Lake Havasu City, Ariz.'s $164.69 million of senior lien wastewater system revenue bonds consisting of Series 2015A GO refunding bonds and Series 2015B refunding bonds.
Moody's Issues Statement on PRASA
"The Puerto Rico Aqueduct and Sewer Authority's (rated Caa3/negative outlook) further postponement of a $750 million bond offering after repeated delays shows the difficult obstacles blocking Puerto Rico's capital market access," Ted Hampton, vice president at Moody's Investors Service, said in a statement. "Investor sentiment has deteriorated sharply since the commonwealth's last public offering almost a year and a half ago. If underwriters can eventually complete the PRASA sale, it may signal a return to some degree of market access that would help maintain liquidity."
Secondary Market
Treasury prices were lower on Wednesday, with the yield on the two-year Treasury note rising to 0.69% from 0.64% on Tuesday, while the 10-year yield rose to 2.14% from 2.12% and the 30-year yield increased to 2.86% from 2.85%.
The yield on the 10-year benchmark muni general obligation on Tuesday was four basis points stronger at 2.13% from 2.09% on Monday, while the yield on the 30-year GO was five basis points stronger at 3.05% from 3.00%, according to the final read of Municipal Market Data's triple-A scale.
The 10-year muni to Treasury ratio was calculated on Tuesday at 100.0% versus 104.7% on Monday, while the 30-year muni to Treasury ratio stood at 106.9% compared to 110.4%, according to MMD.
MSRB Previous Session's Activity
The Municipal Securities Rulemaking Board reported 37,696 trades on Tuesday on volume of $7.486 billion.
Bond Buyer Visible Supply
The Bond Buyer's 30-day visible supply calendar fell $4.70 million to $7.42 billion on Wednesday. The total is comprised of $2.98 billion competitive sales and $4.44 billion of negotiated deals.
Keeley Webster contributed to this report
