Prices of top-rated municipal bonds finished weaker on Wednesday, traders said, with yields on some maturities rising by as much as five basis points.
In the primary, traders faced another day of hefty issuance as JPMorgan began taking retail orders on an almost $515 million electric bond deal from Energy Northwest and Connecticut came to market with a green bond sale on Earth Day.
Secondary Market
Prices of top-shelf municipal bonds fell. The yield on the 10-year benchmark muni general obligation rose four basis points to 1.99% from 1.95% on Tuesday, while the yield on the 30-year GO increased five basis points to 2.91% from 2.86%, according to the final read of Municipal Market Data's triple-A scale.
Treasury prices were lower on Wednesday as the yield on the two-year Treasury note rose to 0.54% from 0.52% on Tuesday, while the 10-year yield increased to 1.97% from 1.91% and the 30-year yield rose to 2.65% from 2.59%.
The 10-year muni to Treasury ratio was calculated on Wednesday at 101.5% versus 100.36% on Tuesday, while the 30-year muni to Treasury ratio stood at 109.7% compared to 109.6%.
Primary Market
JPMorgan priced for retail $514.86 million of Energy Northwest's electric revenue and refunding bond deal.
The $114.23 million of Series 2015-A Project 1 electric revenue refunding bonds were priced as 5s to yield 1.86% in a 2027 split maturity; no retail orders were taken for the other half of the 2027 maturity or for a 2028 maturity.
The $321.51 million of Series 2015-A Columbia Generating Station electric revenue and refunding bonds were priced to yield from 1.59% with a 5% coupon in 2021 to 2.13% with a 5% coupon in 2024; the bonds were also priced as 5s to yield 2.24% in a 2032 split maturity and as 5s to yield 3.07% in a 2035 split maturity. The other halves of the 2032 and 2035 maturities, as well as the 2029-2031, 2033-2034 and a term bond in 2038 were not offered to retail.
The $79.12 million of Series 2015-A Project 3 electric revenue refunding bonds, were priced as 3s to yield 0.64% in 2017 and as 4s to yield 0.96% in 2018. A 2025 split maturity was priced as 4s and 5s to yield 2.26%. No retail orders were taken for the 2026 maturity.
The bonds are rated Aa1 by Moody's Investors Service, AA-minus by Standard and Poor's and AA by Fitch Ratings.
"The bond ratings reflect the credit quality of the full Federal Columbia River Power and Transmission System as the bonds are supported by revenues generated by Columbia Generating Station, 31 federal dams, and 15,000 miles of high-voltage transmission lines," said Jeff Windham, Energy Northwest's Assistant Treasurer.
He added market timing was key to the pricing of the new deal.
"We also wanted to time the transaction based on expected need to obtain funding for capital related expenses at Columbia beginning July 1, 2015; to time the extension of bonds prior to their current maturity of July 1, 2015; and to obtain significant net present value savings on existing bonds that can be refinanced for savings," Windham said.
Since 2001, Energy Northwest has issued over $10 billion of debt, with the highest years of issuance occurring in 2003 and 2011 when it sold $1.245 billion and $1.103 billion of bonds, respectively. Energy Northwest didn't issue any debt in 2013 and sold only $370.6 million of bonds in 2010.
"Energy Northwest net billed project bonds are secured by payments of the Bonneville Power Administration," said Windham. "Bonneville payments to Energy Northwest are made as an operating expense, which take priority over repayment of U.S. Treasury and Federal appropriation obligations. It is our belief that the highly rated bonds are reflective of a long standing history of on-time and in-full repayment related to these net billed projects.
The state of Connecticut came to market with $250 million of green bonds, which were priced by Goldman, Sachs.
The deal was priced to yield from 0.17% with a 2% coupon in 2016 to 3.45% with a 3.25% coupon and to 3.00% with a 5% coupon in a split 2035 maturity. The deal is rated triple-A by Moody's Investors Service, Standard & Poor's and Fitch Ratings.
The offering is the Nutmeg State's first all-green bond sale and follows the state's first issuance of $60 million of green bonds in the Autumn of 2014, which was just a part of an overall $300 million GO sale. Wednesday's offering will finance wastewater and drinking water infrastructure projects all across the state.
Connecticut is following the process guidelines as specified by the green bond principles, according to state Treasurer Denise Nappier, a voluntary standard established last year by a group of environmental finance experts and banks. She said green bond offerings are designed to meet the needs of an expanding investor group with mandates to invest in sustainable projects.
