The municipal bond market roared back to life on Tuesday with the pricing of several big deals heralding the beginning of the end for muni bond issuance in 2014. Two big issues priced for retail while a large competitive sale went up for bid.
"All the deals look attractive," said a trader in Virginia, adding that the new issues were priced to move. "There's been lots of interest in the new supply, and I think all of these new bonds will find a home."
High-quality muni bonds closed out the trading session mostly weaker as Treasuries fell.
Primary Market
The Empire State Development Corp. competitively sold $1.3 billion of bonds in three separate series.
The issues included taxable state personal income tax revenue bonds and Group A and B state personal income tax revenue bonds. The issue is rated triple-A by S&P and AA-plus by Fitch Ratings.
Goldman, Sachs & Co. won the $371.745 million taxables with a True Interest Cost of 2.5226%. The bonds were priced as serials at par to yield from 0.63% in 2016 to 3.08% in 2024.
JPMorgan Securities won the $514.59 million Group B bonds with a TIC of 3.5705%. The bonds were priced as serials to yield from 2.36% with a 5% coupon in 2025 to 3.09% with a 5% coupon in 2036 and a term priced to yield 3.31% with a 5% coupon in 2044.
JPMorgan also won the $415.53 million Group A bonds with a TIC of 1.8208%. Pricing information wasn't immediately available.
In the negotiated sector, Goldman priced $740.7 million of New York State Thruway Authority general revenue refunding bonds for retail investors. The bonds were priced to yield from 1.17% with a 3% coupon in 2019 to a 2032 split maturity with a 3.52% yield with a 3.5% coupon and with a 3.21% yield with a 5% coupon. The issue is rated A2 by Moody's Investors Service and A by Standard & Poor's.
Additionally, Wells Fargo Securities priced for retail the $742.5 million Miami-Dade County, Fla., aviation revenue refunding bond sale, with parts subject to the alternative minimum tax and non-AMT. The $602.34 million AMT bonds were priced to yield from 0.76% with a 5% coupon in 2016 to 3.46% with a 5% in 2029. The $140.115 million non-AMT bonds were priced to yield from 0.64% with a 4% coupon in 2016 to 3.16% with a 5% coupon in 2029. The issue is rated A2 by Moody's and A by S&P and Fitch Ratings.
For Wednesday, the top negotiated deals include the Texas Transportation Commission's $1.6 billion of general obligation mobility fund bonds, scheduled to be priced by Bank of America Merrill Lynch; the New York State Thruway Authority's $750 million of general revenue refunding bonds to be priced by Goldman, Sachs; Phoenix, Ariz., Civic Improvement's $610 million junior lien water system revenue bonds, to be priced by Bank of America Merrill Lynch; Long Island Power Authority $440 million of electric system general revenue bonds, to be priced by Bank of America Merrill Lynch; and Advocate Health Care Network, Ill., $304 million of serial bonds to be priced by JPMorgan.
On the competitive sale calendar for Wednesday are New Jersey's $525 million of general obligation bonds and the Los Angeles, Calif., MTA's $140 million of revenue bonds.
"I don't expect any big balances to be left to weigh on the market," the Virginia trader said. "There's been plenty of demand for municipal bonds."
Secondary Market
High-grade municipal bond prices were weaker at the end of trading, with the yield on the benchmark 10-year general obligation up two basis points to 2.08% from 2.06% at Monday's close while the yield on 30-year GOs rose three points to 3.02% from 2.99% on Monday, according to the final read of MMD's triple-A scale.
Treasuries also weakened, with the two-year note yield rising to 0.53% from 0.49% on Monday. The 10-year yield increased to 2.28% from 2.22% while the 30-year rose to 3.00% from 2.95% on Monday.
On Tuesday, the 10-year muni-to-Treasury ratio closed at 91.1% versus 92.8% on Monday. The 30-year muni to Treasury ratio closed at 100.6%, compared with 101.1% on Monday. The ratio is calculated by taking the yield on a triple-A rated muni and comparing it to the yield on a Treasury of the same maturity. The higher the ratio, the more attractive munis are to Treasuries.
MSRB: Previous Session's Activity
The Municipal Securities Rulemaking Board reported 33,812 trades on Monday for volume of $8.850 billion. Most active on Monday, based on the number of trades, were the New Jersey State Trust Fund Authority's Transportation Program's 2014 Series AA 4 ¼s of 2044 which traded 153 times with an average price of 99.396 for an average yield of 4.279%.
