Market Post: Ky. SPBC Priced; Munis Steady Ahead of FOMC

The big Kentucky issue came to market on Wednesday even as much of the municipal bond market was getting back to normal after an East Coast snowstorm curtailed activity on Monday and Tuesday.

Prices of high-quality municipal bonds were steady at mid-session, traders said, ahead of the Federal Open Market Committee statement in the afternoon.

Primary Market

Citigroup Global Markets priced the $386.845 million Kentucky State Property and Building Commission bonds in two series.

The $132.095 million of new money revenue bonds, Project No. 108 Series A, were priced to yield from 0.40% with a 2% coupon in 2016 to 2.97% with a 5% coupon in 2034; a 2015 maturity was offered as a sealed bid.

The $254.75 million of refunding revenue bonds, Project No. 108 Series B, were priced to yield from 0.40% with a 5% coupon in 2016 to 2.49% with a 5% coupon in 2026; a 2015 maturity was offered as a sealed bid.

Both series are rated Aa3 by Moody's Investors Service and A-plus by Standard & Poor's and Fitch Ratings.

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 Ryan Barrow, executive director of Kentucky's Office of Financial Management.

On Monday, Morgan Stanley priced the Utah Transit Authority's $854.19 million Series 2015A sales tax revenue refunding bonds and 2015 subordinated sales tax revenue refunding bonds. The 2015A bonds were priced with a top yield of 3.08% in 2036 and the 2015 bonds were priced with a top yield of 3.13% in 2037. The UTA saw net present value savings of $77.7 million or 8.8% on the deal, according to Robert Biles, UTA chief financial officer.

Meanwhile, the $1 billion general obligation bond sale by Pennsylvania, originally scheduled to go up for bidding on Tuesday, was pushed back to Feb. 3.

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 competitive sale, originally scheduled for Tuesday. The BAN sale is still being planned for the end of the week or the start of next week, with no final decision having been made yet.

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

Secondary Market

Prices of top-rated munis were steady at midday, traders said.

The yield on the 10-year benchmark general obligation was flat from 1.78% on Tuesday, while the yield on 30-year GOs was unchanged from 2.57%, according to a read of MMD's triple-A benchmark scale.

Treasury prices were mixed, with the two-year note yield unchanged at 0.52% from Tuesday. The 10-year yield dropped to 1.79% from 1.82%, while the 30-year yield fell to 2.36% from 2.39%.

On Tuesday, the 10-year muni to Treasury ratio decreased to 97.8% from 99.3% on Monday, while the 30-year muni to Treasury ratio fell to 107.1% from 108.1%.

MSRB Reports Previous Session's Activity

The Municipal Securities Rulemaking Board reported 29,414 trades on Tuesday on volume of $6.134 billion.

Most active on Tuesday, based on the number of trades, was the Hawaii State Department of Budget and Finance's 2015 Series A special purpose revenue bonds for the Queens Health System 4s of 2040, which traded 58 times with an average price of 104.211 and an average yield of 3.514%.

Richard Williamson and Shelly Sigo contributed to this report.

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