Market Close: UTA Bonds Price, Ky. Deal On Tap, Pa. GOs Delayed

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The municipal bond market weathered the East Coast snowstorm with mixed results as Utah Transit Authority's $854 million offering came to market, the $385 million Kentucky issue was still on course to be priced, and Pennsylvania's $1 billion competitive sale was postponed for a week.

Meanwhile, prices of high-quality municipal bond were stronger on Tuesday, according to traders, as yields weakened by as much as four basis points.

UTA Priced, Ky. Still on Track

Morgan Stanley priced the UTA's $854.19 million deal in two series. The $660.435 million sales tax revenue refunding bonds, Series 2015A were priced to yield from 1.16% with a 2% coupon in 2020 to 2.80% with a 5% coupon in 2038. The $193.755 million subordinated sales tax revenue refunding bonds, Series 2015, were priced to yield from 1.41% with a 3% coupon in 202 to 2.55% with a 5% coupon in 2026.

The sales tax revenue refunding bonds were rated Aa2 by Moody's Investors Service, AAA by Standard & Poor's and AA by Fitch Ratings. The subordinated sales tax revenue refunding bonds were rated A1 by Moody's and A-plus by S&P and Fitch.

The UTA bonds are backed by sales and use taxes generated within the service area. The revenues are pledged through agreements with the counties of Salt Lake and Utah through at least 2045. The refunding ranked as the largest deal in the authority's 45-year history. Since 1997, the UTA has issued about $3.752 billion of bonds in 20 separate issues, according to Thomson Reuters data. Meanwhile, Citigroup Global Markets is still scheduled to price the $385.155 million Kentucky State Property and Building Commission bonds.

The deal, being brought by the Kentucky State Property and Buildings Commission, was scheduled to price for in-state retail orders on Tuesday, with an institutional pricing on Wednesday.

"The transactions continue to be scheduled to price Wednesday, which is supposed to be after the brunt of the storm," Ryan Barrow, executive director of Kentucky's Office of Financial Management, said in an email on Monday.

The offering will be structured as $128.5 million of 20-year new money revenue bonds and $257 million of refunding bonds for debt-service savings. In the current interest rate environment, the commission estimates the refunding's present value savings at about $30.6 million, or 11% of refunded par, according to Barrow.

The bonds are rated Aa3 by Moody's and A-plus by S&P and Fitch.

Primary Market Postponements

The $1 billion general obligation bond sale by Pennsylvania, originally scheduled to go up for bidding on Tuesday was pushed back to Feb. 3, according to Steve Heuer, Director of Bureau of Revenue, Capital and Debt for the Governor's Budget Office.

The Keystone state's GOs will be structured as serials ranging from 2016 to 2035. The issue is rated Aa3 by Moody's and AA-minus by both S&P and Fitch. Pennsylvania last came to market on April 29, 2014 when it sold $834.945 million of GOs to Bank of America Merrill Lynch who won competitively them with a true interest cost of 3.2542%.

The big snowstorm also affected the some of the week's other new issues.

Atlantic City, N.J., postponed its $12 million bond anticipation note sale, originally scheduled for Tuesday. The competitive sale probably will be scheduled for later in the week.

The Katy Independent School District, Texas' $210 million bond sale, which had been expected to be priced by J.P. Morgan on Tuesday, was placed on a day-to-day schedule, according to traders.

And several other smaller issuers in Pennsylvania, New York, New Jersey, Connecticut, Massachusetts and Maine also put off their sales, according to Ipreo. All together, the storm caused issuers to postpone about $1.7 billion of bond sales.

Secondary Market

Prices of top-rated munis were stronger on Tuesday, traders said.

The yield on the 10-year benchmark general obligation was down from two to four basis points from 1.81% on Monday, while the yield on 30-year GOs was off from two to four basis points from 2.59%, according to a read of MMD's triple-A benchmark scale.

Treasury prices were also higher on Tuesday afternoon, with the two-year note yield dipping to 0.50% from 0.51% on Monday. The 10-year yield dropped to 1.79% from 1.83%, while the 30-year yield declined to 2.36% from 2.38%.

On Monday, the 10-year muni to Treasury ratio increased to 99.3% from 98.0% on Friday, while the 30-year muni to Treasury ratio rose to 108.1% from 107.6%.

MSRB Reports Previous Session's Activity

The Municipal Securities Rulemaking Board reported 32,085 trades on Monday on volume of $5.879 billion.

Most active on Monday, based on the number of trades, was the New Jersey Transportation Trust Fund Authority transportation program bond, Series AA 4 1/4s of 2044, which traded 120 times with an average price of 103.633 and an average yield of 3.786%.

Richard Williamson and Shelly Sigo contributed to this report.

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