Demand prompts increase in LA airport deal; muni bond funds see inflows, ICI reports

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Municipal bond buyers saw several big deals hit the market on Wednesday as demand allowed some issuers to increase the size of their offerings.

Barclays Capital priced and repriced and restructured the Los Angeles Department of Airports $427.22 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 originally sized at $377.22 on Wednesday morning and premarketed on Tuesday at $375.88 million.

Traders said the deal received a good reception from buyers, prompting an increase in size. Early in the week, participants said the airport deal would garner a lot of interest.

The deal was repriced to yield from 1.70% with a 4% coupon in 2020 to 3.31% with a 5.25% coupon in 2038. A 2044 term bond was priced as 5s to yield 3.50% and a split 2048 maturity was priced as 4s to yield 3.89% and as 5 1/4s to yield 3.48%.

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 $288.33 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.
RBC Capital Markets priced the New York State Thruway Authority’s $592.01 million of Series L general revenue refunding bonds for retail investors on Wednesday. The deal is slated to be priced on Thursday.

The issue was priced for retail to yield from 1.41% with a 3% and 4% coupons in a split 2019 maturity to 3.70% with a 3.625% coupon and 3.34% with a 5% coupon in a split 2037 maturity.

The deal is rated A2 by Moody’s and A by Fitch.

JPMorgan Securities priced the State of New York Mortgage Agency’s $127.13 million of homeowner mortgage revenue bonds.

The deal was priced at par to yield 3.10% and 3.15% in a split 2029 maturity, 3.25% and 3.30% in a split 2030 maturity and 3.60% in 2034. A 2048 planned amortization class bond was priced as 4s to yield 2.55% with an average life of 4.6 years. The deal is rated Aa1 by Moody’s.

JPMorgan also priced Maricopa County, Ariz.’s $106.67 million of Series 2018A certificates of participation.

The COPs were priced to yield from 1.30% with a 4% coupon in 2018 to 2.29% with a 5% coupon in 2024. The deal is rated Aa1 by Moody’s and AA-plus by S&P and Fitch.

Raymond James & Associates priced the Tennessee Housing Development Agency’s $99.9 million of Issue 2018-1 residential finance program non-AMT, non-ACE bonds.

The issue was priced at par to yield from 1.40% and 1.50% in a split 2019 maturity to 3.45% and 3.50% in a split 2031 maturity, 3.60% in 2033, 3.85% in 2038 and 3.90% in 2042. A 2043 PAC bond was priced as 4s to yield 2.61%. The deal is rated Aa1 by Moody’s and AA-plus by S&P.

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.

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.

ICI: Long-term muni funds see $528M inflow
Long-term municipal bond funds saw an inflow of $528 million in the week ended Feb. 21, the Investment Company Institute reported on Wednesday.

This followed an outflow of $640 million into the tax-exempt mutual funds in the week ended Feb. 14 and an outflow of $588 million in the week ended Feb. 7 and inflows of $1.85 billion in the week ended Jan. 31 and inflows of $2.45 billion in the week ended Jan. 24.

Taxable bond funds saw estimated inflows of $3.97 billion in the latest reporting week, after experiencing outflows of $11.47 billion in the previous week.

ICI said the total estimated inflows to long-term mutual funds and exchange-traded funds were $6.52 billion for the week ended Feb. 21.
Secondary market
Municipal bond portfolio managers were playing a waiting game on Wednesday, looking for volume to normalize.

Traders said the muni market was dull and lifeless on Wednesday afternoon.

“Our market can be summed up in one word: Malaise,” said one New York municipal manager.

“Favorable technicals of low supply and positive fund flows can't seem to break the negative momentum,” he said.

“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.”

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.

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Primary bond market Secondary bond market Municipal bond funds State of California Los Angeles Department of Airports State of New York New York State Thruway Authority State of Texas City of Houston, TX State of Wisconsin County of Baltimore, MD Tennessee Housing Development Agency State of New York Mortgage Agency