It’s always sunny in Philadelphia: Municipal buyers snap up city’s GOs
Buyers got a piece of Philadelphia's general obligation bond deal on Tuesday as the issue priced into a supply-starved municipal market.
"While we’re not seeing official bumps to the scale as of early this afternoon, it’s another day of strong demand, as low issuance and record inflows have continued," Dan Urbanowicz, director of fixed income strategies and a senior portfolio manager at Ziegler Capital Management, said on Tuesday afternoon of the Philadelphia GO deal.
Citing the oversubscription, he said the deal saw the most demand in one to five years — where yields were expected to be bumped eight to 10 basis points.
This was the city’s first GO sale since it was downgraded in March 2018 when S&P Global Ratings lowered the rating to A from A+ based on its view of the city’s ability to manage its pension costs.
This February, the city filed a federal class-action suit against Bank of America, Barclays, Citigroup, Goldman Sachs, JPMorgan Chase, RBC, and Wells Fargo alleging they violated remarketing agreements by conspiring not to compete against one another and working to keep variable-rate demand obligation interest rates artificially high.
Barclays Capital priced and repriced Philadelphia’s (A2/A/A-) $190.16 million of Series 2019A GO refunding bonds.
The bonds were repriced to lower yields from five to 10 basis points. The deal was repriced with 5s to yield from 1.67% in 2020 to 2.61% in 2031.
Since 2009, the city has sold about $7.9 billion of bonds, with the most issuance occurring in 2017 when it sold 2.01 billion. It sold the least amount of debt in 2013 when it sold 91.7 million of bonds.
Dallas (NR/AA-/AA) sold $398.46 million of GOs in two competitive deals.
Morgan Stanley won the $241.045 million of Series 2019A refunding and improvement GOs with a true interest cost of 2.6891%. Citigroup won the $157.415 million of Series 2019B refunding GOs with a TIC of 2.6931%.
PFM Financial Advisors and KG & Associates are the financial advisors. Bracewell, West & Associates and the State Attorney General are the bond counsel.
And the Virginia Public School Authority (Aa1/AA+/AA+) competitively sold $244.23 million of GOs in two issues.
Goldman Sachs won the $157.325 million of Series 2019B 1997 Resolution school financing refunding bonds with a TIC of 1.691%. Wells Fargo Securities won the $86.905 million of Series 2019A 1997 Resolution school financing refunding bonds with a TIC of 2.89%.
Davenport & Co is the financial advisor; McGuire Woods is the bond counsel.
Piper Jaffray priced the Socorro Independent School District of El Paso County, Texas’ (PSF: Aaa/NR/AAA) $135.53 million of Series 2019 unlimited tax school building bonds.
BOK Financial Securities priced the Northwest Independent School District of Denton, Tarrant and Wise Counties, Texas’ (PSF: Aaa/NR/AAA) $92.45 million of Series 2019 unlimited tax school building bonds
JPMorgan Securities priced Mesa, Ariz.’s (Aa2/AA-/NR) $148.47 million of Series 2019A utility systems revenue bonds and Series 2019B utility systems revenue refunding bonds.
Citigroup priced the Idaho Housing and Finance Association’s (A2/NR/A+) $123.33 million of Series 2019A Federal Highway Trust Fund grant and revenue anticipation bonds.
On Wednesday, the biggest deal of the week is hitting the screens as Metro (Aaa/AAA/NR), Ore., is competitively selling $652.8 million of taxable Series 2019 GOs.
Piper Jaffray is the financial advisor while Orrick Herrington is the bond counsel.
Tuesday’s bond sales
Bond Buyer 30-day visible supply at $9.79B
The supply calendar was calculated at $9.79 billion for Tuesday and is composed of $4.67 billion of competitive sales and $5.12 billion of negotiated deals.
Munis were stronger on the MBIS benchmark scale Tuesday, which showed yields falling two basis points in the 10-year maturity and slipping less than a basis point in the 30-year maturity. High-grade munis were also stronger, with yields falling by three basis points in the 10-year maturity and by two basis points in the 30-year maturity.
On Refinitiv Municipal Market Data’s AAA benchmark scale, the yield on the 10-year GO muni fell one basis point while the 30-year muni yield remained unchanged.
Treasuries were stronger as stocks traded mixed.
The 10-year muni-to-Treasury ratio was calculated at 74.3% while the 30-year muni-to-Treasury ratio stood at 86.9%, according to MMD.
Previous session's activity
The MSRB reported 35,454 trades on Monday on volume of $8.79 billion. The 30-day average trade summary showed on a par amount basis of $11.91 million that customers bought $5.68 million, customers sold $4.04 million and inter-dealer trades totaled $2.19 million.
California, New York and Texas were most traded, with the Golden State taking 20.268% of the market, the Empire State taking 10.034% and the Lone Star State taking 9.562%.
The most actively traded security was the Puerto Rico Sales Tax Financing Corp. restructured Series A-1 5s of 2058 which traded 55 times on volume of $39.45 million.
Treasury to sell $50B 4-week bills
The Treasury Department said it will sell $50 billion of four-week discount bills Thursday. There are currently $34.997 billion of four-week bills outstanding.
Treasury also said it will sell $35 billion of eight-week bills and $20 billion of 37-day cash management bills Thursday.
Gary E. Siegel contributed to this report.
Data appearing in this article from Municipal Bond Information Services, including the MBIS municipal bond index, is available on The Bond Buyer Data Workstation. Click here for a brief tour of the Workstation, or contact Ziad Saba at 212-803-6079 for more information.