Tuesday's deal momentum continued on Wednesday as investors were reminded what active looks like in the municipal primary market. From yield-heavy higher education credits to triple-A gold standard deals, the day's calendar had a little something for everyone.
On the yield side, a verbal award was given to the repriced Savannah College of Arts and Design $180 million negotiated deal, according to data provided by Ipreo. Thanks to its lesser ratings - Baa2 from Moody's Investors Service and BBB from Fitch Ratings - investors piled in hoping for yield, but were disappointed when a repricing brought significant tightening, especially in the front end, said a trader based in the Southeast.
Issued by the Private Colleges and Universities Authority in Georgia, the deal's final pricing offered yields ranging from 0.44% on a 5% coupon in 2015 to 4.20% on a 5% coupon in 2044, much tighter than traders had hoped for.
The deal's spread to the curve was particularly notable in the short end, pricing at a 21 basis point discount in 2015 to Monday's Municipal Market Data's triple-B 5% curve, according to data provided by Ipreo. The spread became closer to the curve as the durations increased, and priced just one basis point below MMD triple-B in 2044.
It is important to note, however, the MMD curve represents general obligation credits, which are typically safer and price tighter than revenue bonds in sectors, such as higher education or healthcare, said a trader based in the Midwest.
In the competitive markets, the Virginia Resources Authority placed a triple-A $178 million clean water state revolving fund revenue bond this morning. Citigroup Global Market won the bid and priced the deal's Series 2014B tranche to yield 0.13% on a 2% coupon in 2015 to 3.21% on a 3.50% coupon in 2031, according to data collected from Ipreo.
Municipal scales have remained flat through Tuesday and Wednesday and the market digests the long awaited primary activity. As of 12:20 p.m., EST, yields were steady on bonds maturing between 2015 and 2041 and had tightened up to one basis point on bonds maturing between 2042 and 2044, according to the MMD triple-A 5% scale.
The market is still awaiting the Federal Open Market Committee forecast, set to be released at 2 p.m., EST. The pressure is on after the ISM Manufacturing Index shook the market earlier this month, showing the market's susceptibility to economic data during periods when global tensions are not as strong, according to traders. Economic data's impact on the market was further enforced when it stabilized after a disappointing nonfarm payroll number was reported three days later.
