Municipal bond portfolio managers were playing a waiting game on Wednesday, looking for volume to normalize.
“Obviously there was a rush to issue at the end of 2017; that could be part of the blame for a negative 40% drop year-over-year in volumes for January and February,” said David Tawil, president of Maglan Capital, naming rising interest rates and the new tax regime as culprits.
“As the year progresses, we're keeping a close eye on volumes and rates,” he said. “At the same time, we are continuing to keep a close eye on pension troubles, and whether those troubles will really start to affecting credit ratings and rates.”
He added, “we're always keen on the judicial, political and economic developments in Puerto Rico.”
Volume for the week is estimated by Ipreo at $4.76 billion, comprised of $3.12 billion of negotiated deals and $1.64 billion of competitive sales.
On Wednesday, Barclays Capital priced the Los Angeles Department of Airports $377.22 million of Series 2018A subordinate revenue bonds subject to the alternative minimum tax for the Los Angeles International Airport after it premarketed the deal on Tuesday.
The deal was priced to yield from 1.68% with a 4% coupon in 2020 to 3.36% with a 5.25% coupon in 2038. A 2044 term bond was priced as 5s to yield 3.52% and a split 2048 maturity was priced as 4s to yield 3.91% and as 5 1/4s to yield 3.48%.
On Tuesday, the deal was premarketed at spreads of 11 basis points to 49 basis points over the MMD scale and 50 basis points over the MMD in 2043 and 85 basis points and 42 basis points over the MMD in a split 2048 maturity.
The issue is rated A1 by Moody’s Investors Service and AA-minus by S&P Ratings and Fitch Ratings. All three assign a stable outlook to the bonds.
Since 2008, the airport department has issued about $6 billion of bonds, with the most issuance occurring in 2010 when it sold $2 billion of bonds. The department did not come to market in 2011, 2012 or 2014.
On Wednesday, Wisconsin competitively sold $286.84 million of Series 2018A general obligation bonds.
Citigroup won the bonds with a true interest cost of 3.3027%.
The issue was priced to yield from 1.40% with a 5% coupon in 2019 to 3.27% with a 4% coupon in 2036.
The sale featured a non-traditional five-year call as the state adjusts its debt management practices to the federal government’s elimination of advance refundings.
The deal is rated Aa1 by Moody’s , AA by S&P and AA-plus by Fitch and Kroll Bond Rating Agency.
Since 2008, the state has sold nearly $20 billion of debt, with the most issuance occurring in 2017 when it sold $3.49 billion. The state sold the least amount of bonds in that time, excluding this year, in 2013 when it issued $1.34 billion of debt.
On Thursday, Baltimore County, Md., will competitively sell about $837 million of bonds and notes in four offerings.
The county will sell $225 million of general obligation metropolitan district bonds, 80th issue, and $121 million of 2018 GO consolidated public improvement bonds. Also on Thursday, the county will sell $246 million of Series 2018 consolidated public improvement general obligation bond anticipation notes and $245 million of Series 2018 metropolitan district general bond anticipation notes.
RBC Capital Markets will price the New York State Thruway Authority’s $600 million of Series L general revenue refunding bonds. The deal is slated to be priced on Thursday.
And Bank of America Merrill Lynch is set to price Houston, Texas’ $417 million of airport system subordinate lien revenue and refunding bonds consisting of Series 2918A bonds subject to the alternative minimum tax and Series 2018B non-AMT bonds. The deal is slated to be priced on Thursday.
Also this week, Goldman Sachs will price Alabama’s Black Belt Energy Gas District’s $653 million of gas prepay revenue bonds for Project No. 3.
Previous session's activity
The Municipal Securities Rulemaking Board reported 43,562 trades on Tuesday on volume of $11.35 billion.
California, Texas and New York were the states with the most trades, with the Golden State taking 16.303% of the market, the Empire State taking 14.137% and the Lone Star State taking 8.141%.
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 Vanessa Kim at 212-803-8474 for more information.