Prices of top quality municipal bonds were weaker at Wednesday’s close traders said, as yields on some maturities were a basis point higher.
Two mega deals were priced along with a few other deals of more than $100 million. While the Port Authority of New York and New Jersey priced its $2 billion deal for retail, the market was headlined by Chicago’s O’Hare International Airport’s almost $2 billion sale, which was so well received that orders were cut off after about an hour, according to traders and other market participants.
Primary Market
JPMorgan priced and then re-priced O’Hare’s $1.954 billion of general airport senior lien revenue and refunding bonds, which is broken down into four series.
The $429.39 million of alternative minimum tax, Series 2015A bonds were priced as 2s to yield 0.19% in 2016 and as 5s to yield 1.50% in 2019. The bonds were also priced to yield from 2.75% with a 5% coupon in 2023 to 4.39% with a 4.125% coupon in 2037.
The $1.196 billion of non-AMT series 2015B bonds were priced as 4s to yield 0.18% in 2016 and were also priced to yield from 1.32% with a 5% coupon in 2019 to 3.75% with a 5% coupon in 2035.
The $194.72 million of AMT Series 2015C bonds were priced to yield from 2.18% with a 5% coupon in 2021 to 4.05% with a 5% coupon in 2035. A 2040 term bond was priced to yield 4.54% with a 4.375% coupon and a term bond in 2046 was priced to yield 4.23% with a 5% coupon.
The $134.26 million of non-AMT Series 2015D bonds were priced to yield from 1.85% with a 5% coupon in 2021 to priced at par with a 4% coupon in 2032. A 2035 term bond was priced as 4s to yield 4.05%, a 2040 term bond was priced as 4 1/4s to yield 4.24% and a 2046 term bond was priced as 5s to yield 3.90%. The deal is rated A by Standard and Poor’s, A-minus by Fitch Ratings and A-plus by Kroll Bond Rating Agency.
According to market sources, the deal had roughly $11.5 billion in orders, and orders were cut off at around 11:30 a.m. The same sources indicated that the AMT portions were 7 times oversubscribed and the non-AMT portions were 10 times over.
“There was a lot of talk leading up to this deal about Chicago and how the city would or could taint the deal,” said a Midwest trader. “But there were a lot of savvy institutions who smartly looked through that on this credit and bought it up and got a nice price on it. The City did a nice job marketing it.”
According to John Mousseau, executive vice president and director of fixed income at Cumberland Advisors, people needed and wanted yield.
“Since the employment report last week equities markets have seen a nice performance. People are coming into the market bond, which is driving some of the demand,” he said. “What you have here, is the market made the distinction between the credit of the issuer and the city of Chicago. The market got a yield premium but it was not astronomical.”
Wells Fargo Securities priced the Port Authority of New York and New Jersey’s roughly $2 billion of revenue bonds for retail investors on Wednesday.
The $305.195 million of AMT 193rd Series bonds were priced to yield from 0.73% with a 4% coupon in 2017 to 3.50% with a 5% coupon in 2035. No retail orders were taken for the 2028-2034 maturities. The 2016 maturity is offered as a sealed bid.
The $1.195 billion of non-AMT 194th Series bonds were priced to yield from 0.60% with a 4% coupon in 2017 to 3.18% with a 5% coupon in 2035. A term bond in 2045 was priced as 4s to yield 3.86%. No retail orders were taken for the 2028-2029, 2031-2034, 2040 and 2055 maturities.
There is also a taxable $500 million taxable portion to the deal.
Since 1995, the PANY/NJ has issued roughly $34.31 billion of debt. The years of 2012 and 2014 saw the most issuance with $3.69 billion and $2.88 billion, respectively. The consecutive years of 1999 and 2000 saw the lowest issuance with $400 million and $500 million, respectively.
Wells Fargo Securities priced the California Infrastructure and Economic Development’s $349 million of tax-exempt fixed rate and floating rate notes for the Academy of Motion Picture Arts and Sciences.
The $212.965 million of fixed-rated revenue bonds, Series 2015A were priced to yield from 1.45% with a 2% coupon and 5% coupon in a split 2020 maturity to yield 3.80% and 3.30 with a 4% coupon and a 5% coupon in a split 2035 maturity. A split 2041 maturity term bond was priced as 4s at par and as 5s to yield 3.51%. A 2045 term bond was priced as 4s to yield 4.09%.
No other pricing information was available for the roughly $136 million of floating rate notes.
The majority of bond proceeds will help fund $388 million in construction and programming costs for the 310,000-square-foot museum on the Los Angeles County Museum of Art's campus in the mid-Wilshire district.
The sale also refunds the academy's $35 million Series 2008 variable-rate bonds and terminates a $21 million fixed rate swap with Citi that had a negative $5.6 million valuation, according to a Moody's Investors Service report.
Moody's affirmed its Aa2 rating for the Academy's revenue bonds Sept. 25, but revised the Academy's outlook to negative from stable.
Standard & Poor's assigned the bonds an A rating with a stable outlook.
Elsewhere in the Golden State, the city and county of San Francisco sold $127.98 million of refunding certificates of participation, Series 2015-R1 on Wednesday. Barclays Capital won the bidding war with a true interest cost of 3.54%. The COPs were priced to yield from 0.22% with a 5% coupon in 2016 to 3.79% with a 4% coupon in 2040. The deal is rated Aa3 by Moody’s, AA by S&P and AA-minus by Fitch.
Secondary Trading
The yield on the 10-year benchmark muni general obligation closed Wednesday one basis point higher at 2.02% from 2.01% on Tuesday, while the 30-year GO rose one basis point to 3.07% from 3.06%, according to a final read of the Municipal Market Data's triple-A scale.
Treasury prices were mixed at the close on Wednesday, with the yield on the two-year Treasury rising to 0.62% from 0.61% from Tuesday, while the 10-year yield increased to 2.07% from 2.06% and the 30-year yield decreased to 2.89% from 2.90%.
The 10-year muni to Treasury ratio was calculated on Tuesday at 98.1% versus 98.8% on Tuesday, while the 30-year muni to Treasury ratio stood at 106.4% compared to 106.5%, according to MMD.
Bond Buyer Visible Supply
The Bond Buyer's 30-day visible supply calendar fell $2.93 billion to $10.11 billion on Wednesday. The total is comprised of $3.36 billion competitive sales and $6.75 billion of negotiated deals.
MSRB Previous Session's Activity
The Municipal Securities Rulemaking Board reported 36,838 trades on Tuesday on volume of $7.234 billion.
