Market Post: UTA Issue Prices, Ky. Deal On Tap, Pa. GOs Set for Next Week

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

Meanwhile, prices of high-quality municipal bond were unchanged on Tuesday, according to traders.

UTA Prices, 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 Utah Transit Authority expects major savings and a more manageable debt-service schedule with the refunding, which ranks as the largest deal in its 45-year history.

The 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, which is beyond the 2038 final maturity date of the bonds.

Meanwhile, Citigroup Global Markets is still slated 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 final 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 by email from New York on Monday.

The offering is structured as $128.5 million in 20-year new money revenue bonds and $257 million in 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

The $1 billion general obligation sale from 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.

Although the state's budget office is located in Harrisburg, was in the path of the heaviest snow, Heuer said the decision was based on the expectation that most of the Northeast was going to be pummeled.

The Keystone state's GOs will be structured as serials ranging from 2016 to 2035. The issue is rated Aa3 by Moody's Investors Service and AA-minus by both Standard & Poor's and Fitch Ratings. 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 their $12 million bond anticipation note sale, originally scheduled for Tuesday. The deal will likely 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 postponed their sales, according to Ipreo.

Secondary Market

Treasury prices were higher on Tuesday, with the two-year note yield down to 0.48% from 0.51% on Friday. The 10-year yield was down to 1.76% from 1.83%, while the 30-year yield fell to 2.34% from 2.38%.

Prices of top-rated munis were unchanged on Monday, traders said. The yield on the 10-year benchmark general obligation was unchanged from 1.81% on Friday, while the yield on 30-year GOs was flat from 2.59%, according to a final read of MMD's triple-A benchmark scale.

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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