Prices of top-shelf municipal bonds closed steady on Wednesday, according to traders, while bonds of the Puerto Rico Electric Power Authority rallied after it was announced that PREPA and its bondholders had agreed to a debt restructuring plan.
PREPA and its forbearing bondholders reached an agreement that would cut the amount of the authority's outstanding debt, reduce near-term debt service, and lower interest rates.
The pact announced Wednesday by the authority and the forbearing group doesn't address its lines of credit or its insured debt.
While Assured Guaranty and Syncora Guarantee agreed to extend the forbearance to Sept. 18, National Public Finance Guarantee withdrew from the forbearance.
"PREPA bonds are stronger by 8-10 points and traded as high as $68," according to an analyst at Interactive Data, who added that bonds from across the commonwealth spectrum were higher on the day.
The PREPA Series 2013A 6 3/4s of 2036 were trading on Wednesday at a low price of 67.125 cents on the dollar, a high yield of 10.726%, in seven trades totaling $4.93 million, according to the Municipal Securities Rulemaking Board's EMMA website. On Aug. 25, the 6 3/4s traded at a low price of 54.25, a high yield of 13.262%, in two trades totaling $80,000.
The PREPA 2005 Series RR revenue 5s of 2028 were trading at a low price of 89.058, a high yield of 6.253%, in three trades for $75,000. The previous time the bonds traded on Aug. 19, the 5s bonds traded at a low price of 87.532, a yield of 6.44%, in two trades of $40,000, according to EMMA.
The PREPA 2003 Series WW power revenue 5s of 2028 were trading at a low price of 67.75, a high yield of 9.374%, in one trade for $595,000. On Tuesday, the bonds traded at a low price of 53.23, a high yield of 12.359%, in two trades for $10,000, according to EMMA.
The PREPA 2003 Series NN revenue 4 3/4s of 2033 were trading at a low price of 81.30, a high yield of 6.542%, in eight trades for $90,000. On Tuesday, the bonds traded at a low price of 79.548, a high yield of 6.737%, in eight trades of $40,000, according to EMMA.
The PREPA 2007 Series V V power revenue refunding 5 1/4s of 2035 were trading at a low price of 84.055, a high yield of 6.716%, in 10 trades for $220,000. On Aug. 31, the bonds traded at a low price of 85.025, a high yield of 6.615%, in three trades for $300,000, according to EMMA.
In contrast, the Puerto Rico commonwealth Series 2014A general obligation 8s of 2035 on Wednesday traded at a low price of 73.125, a high yield of 11.456%, in 23 trades for $41.28 million. On Tuesday, the 8s traded as low as 73, a high yield of 11.476% in six trades totaling $20.2 million, according to EMMA.
The commonwealth Series 2007A public improvement refunding 5 1/2s of 2017 traded at a low price of 72.25, a high yield of 25.526%, in two trades for $9.32 million. On Aug. 20, the 5 1/2s traded as low as 61.08, a high yield of 36.081% in four trades totaling $60,000, according to EMMA.
The Puerto Rico Aqueduct and Sewer Authority Series 2012A revenue 5 1/4s of 2042 traded at a low price of 65.375, a high yield of 8.563%, in 18 trades totaling $19.85 million. On Tuesday, the 5 1/4s traded at a low price of 61.718, a high yield of 9.078%, according to EMMA.
In the equities market, prices of municipal bond insurers wrapping Puerto Rico debt were higher on Wednesday.
Shares of Assured Guaranty rose 4.40% to $25.89 per share from Tuesday's close of $24.80 per share.
Shares of MBIA gained 12.28% to $7.59 per share from Tuesday's close of $6.75 per share.
And shares of Syncora Holdings increased by 1.45% to 70 cents per share from yesterday's close of 69 cents per share.
Secondary Market
The yield on the 10-year benchmark muni general obligation on Wednesday closed steady from 2.19% on Tuesday, while the yield on the 30-year GO was unchanged from 3.12%, according to the final read of Municipal Market Data's triple-A scale.
Treasury prices were mostly lower on Wednesday, with the yield on the two-year Treasury note unchanged from 0.71% on Tuesday, while the 10-year yield rose to 2.19% from 2.18% and the 30-year yield increased to 2.96% from 2.94%.
The 10-year muni to Treasury ratio was calculated on Wednesday at 100.0% versus 101.0% on Tuesday, while the 30-year muni to Treasury ratio stood at 105.4% compared to 106.5%, according to MMD.
Primary Market
Barclays Capital priced and repriced the Lower Colorado River Authority, Texas' $135 million of Series 2015D refunding revenue bonds.
The bonds were priced to yield from 0.38% with a 3% coupon in 2016 to 1.74% with a 5% coupon in 2020; and as 5s to yield from 2.25% in 2022 to 3.52% in 2031; a split 2032 maturity was priced as 5s to yield 3.58% and as 3 3/4s to yield 3.95%.
The issue is rated A by Standard & Poor's and Fitch Ratings and carries stable outlooks from both rating agencies.
Since 1995, the Lower Colorado River Authority has issued roughly $7.67 billion of debt. The highest issuance years occurred in 1999 and 2010, when they issued $1.08 billion and $997 million, respectively. The LCRA did not issue any debt in 2007 and 2014.
Late on Tuesday, JPMorgan Securities priced the Dormitory Authority of the State of New York's $1.1 billion of Series 2015E general purpose state personal income tax revenue bonds for institutions after holding an order period for retail investors earlier in the day.
The DASNY issue was priced for institutions to yield from 0.50% with a 3% coupon in 2017 to 3.70% with a 3.50% coupon in 2037.
Earlier on Tuesday, the issue was priced for retail to yield from 0.90% with 2%, 4% and 5% coupons in a triple-split 2018 maturity to 3.70% with a 3.50% coupon in 2037. The 2027-2028, 2030-2035 and 2036 maturities were not offered to retail while the 2017 maturity was offered as a sealed bid.
The DASNY deal was rated Aa1 by Moody's and triple-A by S&P; the credit carries a stable outlook from both rating agencies.
"One development of note was the cheapening of Dorm PIT offerings in the secondary after the pricing of the $1 billion Dorm PIT deal," MMD Senior Analyst Randy Smolik said in a Wednesday market comment. "The primary priced 5s as wide as +40 to +41 basis points in the 15- to 20-year range. Secondary offerings on older issue bonds were as wide as +36 bps, in contrast to +33 to +35 bps trading through most of August."
