Prices of top-shelf municipal bonds finished steady on Monday, traders said, with yields on most maturities closing unchanged. In the primary, muni traders were preparing to take on a paltry new issue slate totaling about $3.3 billion.
Meanwhile, the Puerto Rico Aqueduct and Sewer Authority said it got an extension on a $90 million loan it owed to Banco Popular after it was unable to sell $750 million of bonds before the loan came due.
Secondary Market
The yield on the 10-year benchmark muni general obligation was unchanged from 2.16% on Friday, while the yield on the 30-year GO was steady at 3.10%, according to the final read of Municipal Market Data's triple-A scale.
Treasury prices were lower on Monday, with the yield on the two-year Treasury note rising to 0.73% from 0.72% on Friday, while the 10-year yield rose to 2.19% from 2.18% and the 30-year yield increased to 2.92% from 2.89%.
Primary Market
Volume for the week was estimated at $3.26 billion, consisting of $2.38 billion of negotiated deals and $876 million of competitive sales.
Topping the calendar is a $1 billion offering from the Dormitory Authority of the State of New York. Scheduled to be priced by JPMorgan Securities on Wednesday after a one-day retail order period on Tuesday, the DASNY deal is rated Aa1 by Moody's Investors Service and triple-A by Standard & Poor's.
DASNY anticipates the proceeds will be used to refund certain outstanding bonds issued under various programs, which may include bonds under the personal income tax revenue bond program issued by the Dormitory Authority and the Environmental Facilities Corp., the CUNY program, and the upstate community college program. The bonds will be issued under the personal income tax general purpose resolution.
"The market has been very volatile this week, but given the strength and familiarity of the personal income tax program we are optimistic that the sale will go well," a spokesperson for DASNY said last week. "Market conditions next week will dictate the duration of the retail order period."
Michael Pietronico, CEO of Miller Tabak Asset Management, said "We expect this deal to do quite well, as demand for New York paper remains strong."
City Securities is slated to price Wednesday Valparaiso, Ind.'s $143 million multi-school building construction first mortgage bonds. The issue is expected to be rated AA-plus by S&P.
Barclays Capital is set to price the Lower Colorado River Authority, Texas' $135 million of Series 2015D refunding revenue bonds on Wednesday. The issue is rated A by S&P and Fitch Ratings.
In the competitive arena, the state of Wisconsin will sell $391 million of Series 2015C general obligation bonds on Tuesday. The issue is rated AA by Fitch.
The bonds mature between 2017 and 2036 and offer an eight-year call instead of the traditional 10-year; Wisconsin has been using the eight-year call on recent sales due to market reception, said capital finance director David Erdman.
Prior Week's Actively Traded Issues by Sector
Revenue bonds comprised 53.81% of new issuance in the week ended Aug. 28, down from 55.37% in the previous week, according to Markit. General obligation bonds comprised 37.72% of total issuance, up from 35.72%, while taxable bonds made up 8.47%, down from 8.91%.
Some of the most actively traded issues in the week were in New Jersey, California and Georgia, according to Markit.
In the revenue bond sector, the New Jersey Economic Development Authority 4s of 2024 were traded 133 times. In the GO bond sector, the California 5s of 2045 were traded 76 times. And in the taxable bond sector, the Cobb-Marietta Coliseum and Exhibit Hall Authority, Ga. 4 1/2s of 2047 were traded 32 times, Markit said.
Puerto Rico Push Back
Over the weekend, Puerto Rico Gov. Alejandro Garcia Padilla extended the deadline to Sept. 8 for a proposal on restructuring the commonwealth's $72 billion debt.
The plan had been scheduled to be sent on Sunday, but tropical storm Erika had forced government officials to make a postponement.
On Monday, Puerto Rico Aqueduct and Sewer Authority Executive President Alberto Lazaro Castro said in a statement that PRASA had secured an extension to repay a $90 million loan that was due Aug. 31 to Banco Popular.
The loan was due on Monday and will now be extended 15 days, according to Lazaro Castro. He said Banco Popular will extend the loan through Sept. 15 and Bank of America Merrill Lynch is then expected to acquire $75 million of the loan with Banco Popular keeping $15 million. Teruca Rullán, a spokeswoman for the bank, said the deal wasn't finalized as of 3:45 New York time.
PRASA is still trying to sell $750 million of senior lien revenue bonds.
"Our bond issue is 'day to day', which means we are observing market conditions and waiting for the right timing to price our deal," Lazaro Castro said. "We recognize our schedule was too close to the Commonwealth's draft Fiscal Adjustment Plan presentation and the Puerto Rico Electric Power Authority's (PREPA) negotiation deadline with its creditors. Although these are unrelated to PRASA, we decided it was a better strategy to wait for those externalities to occur and take that uncertainty away from our deal."
