Municipal bond prices ended weaker on Tuesday as the nearly $499 million Barclays Center deal came to market amid eager buyers.
Goldman Sachs priced the Brooklyn Area Local Development Corp.'s $483.45 million of Series 2016A tax-exempt and $15 million of Series 2016B taxable bonds backed by payments in lieu of taxes.
The Series 2016A tax-exempts were priced and repriced to yield 0.90% with a 5% coupon in 2017 and to yield from 1.36% with a 5% coupon in 2020 to 3.076% with a 3% coupon in 2036. A 2042 term bond was priced as 5s to yield 2.88% while a 2043 term was priced as 3s to yield 3.10%.
The Series 2016B taxables were priced to yield about 210 basis points over the comparable Treasury security in 2041.
Sources said the deal was oversubscribed by at least 10 times in every maturity.
The bonds are rated Baa3 by Moody's Investors Service and BBB-minus by S&P Global Rating, with the exceptions of the 2029, 2031 through 2036 and 2043 maturities totaling $133.25 million that are insured by Assured Guaranty Municipal.
"It was the marquee deal of the week and the whole world wanted it," said a New York trader. "There is such a huge hunger for yield."
Buyers are focused on getting "the max yield," the trader said. "It's a simple equation in munis right now, yields are so low they are choking people, but compared to other rates, they look OK, so you just put your head down and buy. The mentality right now is I got money, I am going to put it to work and then give me the next deal."
The PILOTs will refund outstanding bonds from a 2009 issue that helped build the Barclays Center. The Series 2009 bonds were priced by Goldman with top yields of 6.35% with a 6.25% coupon in 2040 and 6.476% with a 6.375% coupon in 2043.
Morgan Stanley priced the New Jersey Healthcare Facilities Financing Authority's $248.53 million of Series 2016 revenue bonds for the St. Joseph's Healthcare System Obligated Group.
The issue was priced to yield from 0.95% with a 4% coupon in 2017 to 2.96% with a 5% coupon in 2036. A 2041 term bond was priced as 5s to yield 2.98% and a 2048 term was priced as 4s to yield 3.48%. The deal is rated Baa3 by Moody's and BBB-minus by S&P.
Barclays Capital priced the Port of Tacoma, Wash.'s three series of bonds totaling $245.62 million.
The $35.97 million of Series 2016A revenue refunding bonds, not subject to the alternative minimum tax, were priced to yield from 1.20% with a 5% coupon in 2022 to 2.52% with a 4% coupon in 2034.
The $103.06 million of Series 2016B revenue and refunding AMT bonds were priced to yield from 0.69% with a 2% coupon in 2017 to 2.75% with a 5% coupon in 2038; a 2043 term bond was priced as 5s to yield 2.78% and a 2943 term was priced as 3 1/8s to yield 3.25%.
The Series 2016A non-AMT and Series 2016B AMT bonds are rated Aa3 by Moody's and AA-minus by S&P.
The $106.59 million of Series 2016A limited tax general obligation refunding non-AMT bonds were priced as 3s to yield 0.52% in 2017 and as 4s to yield 0.58% in 2018 and to yield from 1.02% with a 5% coupon in 2021 to 2.60% with a 4% coupon in 2038.
The Series 2016A non-AMT deal is rated Aa2 by Moody's and AA by S&P.
Bank of America Merrill Lynch priced the Boston Water and Sewer Commission's $146.05 million of Series 2016A&B senior series general revenue and refunding bonds.
The $60.64 million of Series 2016A bonds were priced as 5s to yield 0.76% in 2020, 0.91% in 2021 and 1.08% in 2022 and to yield from 1.62% with a 5% coupon in 2027 to 2.47% with a 3% coupon in 2031.
The $85.41 million of Series 2016B bonds were priced to yield from 0.49% with a 4% coupon in 2017 to 1.86% with a 5% coupon in 2036; a 2041 term was priced at par to yield 3% and a 2046 term was priced as 3s to yield 3.03%.
The deal is rated Aa1 by Moody's and AA-plus by S&P.
Goldman priced the Irvine Ranch Water District, Calif.'s $117.51 million of Series 2016 certificates of participation.
The COPs were priced as 5s to yield from 0.69% in 2021 to 2.08% in 2036 and to yield 2.18% in 2041 and 2.23% in 2046. The deal is rated ripple-A by S&P and Fitch.
Requests for New Muni CUSIPs Drop 30% in July
Demand for new municipal CUSIP identifiers plunged 30% in July, CUSIP Global Services said in a report released on Monday.
A total of 1,218 new municipal bond identifier requests were made in June, down from 1,754 in June, a drop driven largely by the fact that most states were just starting their new fiscal years. The results mark the end of a five-month run of increases in muni bond CUSIP requests and are the lowest monthly total since February when 1,137 identifiers were sought.
On a year-over-year basis, however, July municipal bond identifier requests were up by 1% at 9,632 versus 9,541 in 2015. In the seven months of this year, total municipal CUSIP orders totaled 11,123 up 1.8% from 10,924 in the first seven months of 2015.
The report tracks requests by issuers for bond identifiers as an early indicator of new volume and suggests a resurgence of municipal issuance in the next several weeks.
Long-term muni note CUSIP order volume totaled 82 in July compared to 107 requests in June. Short-term note muni CUSIP orders fell as 124 orders were processed, down from 176 in June.
"Recent issuance data suggest that capital markets activity is still solid, despite a lot of uncertainty" Gerard Faulkner, Director of Operations for CUSIP Global Services, said in a release. "Based on July's data, the second half of the year is off to a good start."
Regionally, municipal bond issuers in Texas led the way with muni CUSIP requests, with 1,211 so far in 2016. New York came in second with 960 and California was third with 734.
Secondary Market
The yield on the 10-year benchmark muni general obligation rose one basis point to 1.41% from 1.40% on Monday, while the yield on the 30-year muni increased one basis point to 2.14% from 2.13%, according to the final read of Municipal Market Data's triple-A scale.
U.S. Treasuries were also weaker on Tuesday. The yield on the two-year Treasury rose to 0.74% from 0.72% on Monday, the 10-year Treasury yield gained to 1.57% from 1.55% and the yield on the 30-year Treasury bond increased to 2.29% from 2.28%.
The 10-year muni to Treasury ratio was calculated at 89.5% on Tuesday compared to 90.4% on Monday, while the 30-year muni to Treasury ratio stood at 93.2% versus 93.6%, according to MMD.
MSRB: Previous Session's Activity
The Municipal Securities Rulemaking Board reported 30,045 trades on Monday on volume of $9.67 billion.
Ramirez Remains Bullish on Munis
Ramirez remains bullish on the municipal bond market "with now better ratios and still fair – but still rich – sector valuations on a one year basis," Peter Block, Managing Director at Samuel A. Ramirez & Co., said in a weekly market commentary.
"We think investors can earn an average of 63 basis points in rolldown return in the sweet spot of the curve – six-years to 15-years – at this time, which when added to carry (assuming 5% coupon), is substantially similar to longer bonds return, but without additional risk," Block wrote on Monday. "Roll returns in this part of the curve have consistently been the most favorable on a risk-adjusted basis over the past year."
