The Dormitory Authority of the State of New York emerged as one of the top traded issues in the secondary market Tuesday morning as investors made room in portfolios for the incoming $2 billion New York City deal.
DASNY picked up heavy trading on Tuesday morning, with $24.38 million in trades recorded as of 12:30 p.m., EST, according to data provided by Municipal Securities Rulemaking Board's disclosure website EMMA. The volume was edging near double Monday's $13.08 million and marked the heaviest day of trading volume since the bonds were issued in early August, according to EMMA.
Yields on the income tax revenue bonds 5s of 2037 fell to 3.21% in round lot trading on Tuesday morning, down from a high of 3.374% the day prior, according to EMMA.
Portfolio managers are likely dumping the bonds in advance of the highly anticipated New York City sales tax asset revenue bonds scheduled to price for institutional orders on Tuesday morning, agreed traders. At the time of publication, pricing for institution was not yet available.
Traders expected the deal would likely price through the Municipal Market Data triple-A 5% curve if it's successful retail order period was any indication of what the institutional appetite would be. After a two-day retail order period starting on Friday and ending Monday, roughly a third of the deal had been placed at about a 20 basis point spread to MMD, which traders found to be aggressive but fair, considering the issuer's unavailability in the market.
Sales Tax Asset Receivable Corporation, the issuer behind the deal, has not tapped the market since 2004, making Tuesday's deal especially attractive to fund managers hoping to achieve more diversity within New York state specific funds, agreed traders.
Traders expected the strength seen in the retail order period to continue into Tuesday's institutional pricing, and expected it to price through the MMD curve. The deal is rated Aa1 by Moody's Investors Service and triple-A by Standard & Poor's.
As of 10:54 a.m., EST, on Tuesday, the MMD triple-A curve was steady to slightly stronger on the long end. Bonds maturing between 2015 and 2018 were unchanged as those maturing between 2019 and 2041 tightened up to one basis point, according to data provided by TM3. Bonds maturing between 2042 and 2044 strengthened up to two basis points.
The front end of the U.S. Treasury curve continued its strength on Tuesday morning following a U.S. airstrike in Syria and a presidential address giving details of the situation. The two-year note fell three basis points to 0.55% compared to Monday's close, while the 10- and 30-year fell two and one basis points respectively from Monday's close. The 10-year was at 2.55% Tuesday morning while the 30-year was at 3.27%.
