Municipal bonds finished stronger on Tuesday as the Hudson Yards deal hit the market along with a host of other large sales.

Primary market

Goldman Sachs priced and repriced the Hudson Yards Infrastructure Corp., N.Y.’s $2.12 billion of tax-exempt Fiscal 2017 Series A second indenture revenue bonds for institutions on Tuesday after holding a two-day retail order period.

The HYIC bonds were repriced for institutions to yield from 1.28% with 3% and 5% coupons in a split 2022 maturity to 3.07% with a 5% coupon in 2039. A 2042 maturity was priced as 5s to yield 3.10%, a 2044 maturity was priced as 4s to yield 3.43%, a 2045 maturity was priced as 5s to yield 3.13% and a 3047 maturity was priced as 4s to yield approximately 3.355%.

On Monday, the HYIC bonds were priced for retail to yield from 1.31% with 3% and 5% coupons in a split 2022 maturity to approximately 3.568% with a 3.50% coupon in 2038; a 2042 maturity was priced as 5s to yield 3.19% while a 2045 maturity was priced as 4s to yield 3.53%. No retail orders were taken in the 2031, 2033-2035, 2039, 2041, 2044 or 2047 maturities.

The deal was met with a warm reception, according to traders.

“It was a success,” said one New York trader. “Spreads were pushed pretty tight to start and because it's a name that does not normally issue (only one other deal before this week) and it's a refunding of that deal -- it had strong sponsorship.”

The HYIC also competitively sold $33.36 million of taxable Fiscal 2017 Series B bonds on Tuesday.

Wells Fargo Securities won the issue with a true interest cost of 2.47%. The taxables were priced at par to yield 3.875% in 2038.

The deals are rated Aa3 by Moody's Investors Service and A-plus by both S&P Global Ratings and Fitch Ratings. All three rating agencies assign stable outlooks to the credit.

“Demand is crazy strong and most deals are getting bumped significantly more than they have historically,” said one market source. “Some deals are being bumped 15 basis points or more where normally you might see a 2-5 basis point bump. It seems as though underwriters are having a tough time gauging demand for their deals and are ending up multiple time over-subscribed up and down the curve.”

Bank of America Merrill Lynch priced and repriced the California Municipal Finance Authority’s $234.09 million of Series 2017A revenue refunding bonds for the Eisenhower Medical Center.

The issue was priced to yield from 2.10% with a 5% coupon in 2024 to 3.57% with a 5% coupon in 2037. A split 2042 maturity was priced as 4s to yield 3.95% and as 5s to yield 3.59% while a split 2047 maturity was priced at par to yield 4% and as 5s to yield 3.65%.

The deal is rated Baa2 by Moody’s and BBB by Fitch.

Since 2007, the California MFA has sold about $5.46 billion of securities with the most issuance before this year occurring in 2015 when it sold $840 million. The MFA had come to market every year over the past 10 years, with the lowest issuance taking place in 2012 when it sold $140 million.

Raymond James priced and repriced the Metropolitan Government of Nashville and Davidson County, Tenn.’s $185 million of Series 2017 A&B electric system revenue and refunding bonds.

The $107.55 million of Series 2017A revenue bonds were repriced to yield from 0.81% with a 3% coupon in 2018 to 2.80% with a 5% coupon in 2037; a 2042 maturity was priced as 5s to yield 2.92%. The $77.15 million of Series 2017B revenue refunding bonds were repriced as 5s to yield from 1.31% in 2022 to 2.47% in 2031.

The deal is rated AA-plus by S&P and Fitch.

Wells Fargo Securities priced and repriced Clark County, Nev.’s $150 million of Series 2017 indexed fuel tax and subordinate motor vehicle fuel tax highway revenue bonds.

The bonds were repriced to yield from 0.85% with a 4% coupon in 2018 to 3.02% with a 5% coupon in 2037. The deal is rated Aa3 by Moody’s and AA-minus by S&P.

The Northside Independent School District, Texas, came to market with over $185 million of bonds in two separate sales.

Citigroup priced the district’s $100 million of Series 2017 variable-rate unlimited tax school building bonds. The issue was priced at par to yield 1.45% in 2047 with a mandatory tender date in 2020. Raymond James priced the district’s $86.87 million of Series 2017 unlimited tax school building and refunding bonds. The issue was priced to yield from 0.88% with a 3% coupon in 2018 to 3.32% with a 3.25% coupon in 2037.

The deals, which are backed by the Permanent School Fund guarantee program, are rated triple-A by Moody’s and Fitch.

Wells Fargo Securities priced the Virginia Housing Development Authority’s $150.08 million of Series 2017A taxable pass-through commonwealth mortgage bonds. The issue was priced at par to yield 3.125% in 2039. The deal is rated triple-A by Moody’s and S&P.

Fort Worth, Texas, competitively sold $111.6 million of Series 2017 water and sewer system revenue refunding and improvement bonds.

BAML won the bonds with a TIC of 3.34%. The issue was priced to yield from 0.87% with a 5% coupon in 2018 to 3.34% with a 4% coupon in 2042; a 2047 maturity was priced as 4s to yield 3.45%. The deal is rated Aa1 by Moody’s, AA-plus by S&P and AA by Fitch.


Secondary market
The yield on the 10-year benchmark muni general obligation fell two basis points to 1.97% from 1.99% on Monday, while the 30-year GO yield declined three basis points to 2.82% from 2.85%, according to the final read of Municipal Market Data's triple-A scale.

Since the start of the year, the 10-year muni yield has fallen 35 basis points while the 30-year yield has dropped 23 basis points. On Jan. 3, the 10-year muni stood at 2.32% while the 30-year was at 3.05%.

U.S. Treasuries were weaker on Tuesday. The yield on the two-year Treasury rose to 1.31% from 1.27% on Monday as the 10-year Treasury yield gained to 2.28% from 2.25% while the yield on the 30-year Treasury bond increased to 2.94% from 2.91%.

The 10-year muni to Treasury ratio was calculated at 86.3% on Tuesday, compared with 88.3% on Monday, while the 30-year muni to Treasury ratio stood at 95.8%, versus 97.8%, according to MMD.

MSRB: Previous session's activity
The Municipal Securities Rulemaking Board reported 37,656 trades on Monday on volume of $7.44 billion.

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