A sale of Dallas-Fort Worth, Texas airport joint revenue improvement bonds was increased to $222.4 million from $190.15 million on Wednesday, boosted by demand for higher-yielding debt. .
Yields on the bonds, which were brought to market by Raymond James, ranged from 2.44% with a 5% coupon in 2021 to 4.5% at par in 2024.
"Airport bonds, healthcare and some university credits are some general areas I think are the cheapest," the trader from New Jersey said. "Those would be the sectors where you would expect to have some demand."
The deal is rated A-plus by Standard & Poor's and A by Fitch Ratings. The bonds can be called at par in 2022.
"In general [the airport sector] is going to perform well now because most airports are a little higher yielding when people are reaching for yield," a trader in Chicago said. "It's a sector people will gravitate to because it's higher yielding."
In a report released Tuesday, Janney Capital Markets said it viewed the airport sector as having a "stable" outlook. Janney wrote in a longer report released on May 9 that more people are flying since the economic recovery.
"It's easier to explain airport credits to customers because the airport sector is on the rebound rather than low credits that are continuously going down," a trader in Florida said.
The DFW bonds' high yield boosts their attractiveness, investors said. Low municipal supply and high demand for munis has driven down yields.
"I can see there being a lot of demand for the Dallas Fort Worth bonds," the trader in Chicago said. "You can pick up yield and they are cheaper than an AA GO, obviously."
Other than the DFW deal, investors complained that the other deals that came to market were priced too high.
"The scales on deals coming to market did seem pretty rich," a trader in California said.
The trader in New Jersey said that he had bought a triple-B healthcare bond and had looked at a university deal, but the other deals that came to market on Wednesday had spreads that were too tight.
Market participants said that deals coming this week were priced richly because the municipal yields have remained low. Yields have been rising the last three days, but investors say this is the market attempt to process what one trader in New York described as "one of the most hated rallies of all time".
Yields for bonds maturing in six to 20 years rose two basis points, and increased by three basis points for bonds maturing in 21 to 30 years, according to Municipal Market Data's triple-A scale.
Yields on the two-year held steady at 0.34%, and increased by two-basis points for the 10-year and 30-year respectively to 2.21% and 3.47%, according to Municipal Market Advisors' data.
Municipal bonds weakened after the release of the Federal Reserve Open Market Committee's minutes, which said continued stimulus won't cause excessive inflation, and showed the Fed discussed tools it would use for "eventual normalization," stressing it wouldn't happen soon.
While the market was selling off slightly, market participants predicted before the release that the minutes would not have a huge impact on munis.
"In our view, the Fed is likely to maintain its steady removal of accommodation and end quantitative easing near the end of the third quarter," U.S. Bank Wealth Management wrote in a report released on Wednesday. "Over the next three to four quarters, we also expect increased interest rate volatility as the Fed exits extraordinary easing measures and shifts towards a more traditional monetary policy stance."
One of the competitive deals that came to market on Thursday was the $116.5 million of Texas' Frisco Independent School District unlimited tax school building and refunding bonds that Bank of America Merrill Lynch won with yields from 0.30% to 2% coupon in 2015 to 3.71% with a 4% coupon in 2044. The deal is callable at par in 2024 and is rated triple-A by Moody's and S&P.
Another of the bigger competitive deals scheduled for the week, $200 million of Massachusetts GOs, was won by Raymond James. Yields ranged from 0.20% with 1% coupon in 2015 to 3.05% at par in 2024. There is no optional call. The deal is rated Aa1 by Moody's and an AA-plus by both S&P and Fitch.
Bank of America Merrill Lynch repriced $100 million of pollution control revenue refunding bonds for the city of Rockport, Ind. The deal has a 1.75% coupon in 2025 and is not rated.
Morgan Stanley won $200 million of Fulton County, Ga., tax anticipation notes. The notes yield 0.089% with a 1% coupon maturing in 2014. There is no call option. The deal is rated SP-1-plus by S&P and F1-plus by Fitch.
Wells Fargo won the bid for a two-part deal totaling $135.5 million of Kansas Development Finance Authority of revenue bonds.
The deal consists of $115.9 million Kansas State University housing projects bonds and $19.5 million Kansas State University College of Engineering project bonds. The deal is rated Aa2 by Moody's.
Treasuries weakened Wednesday afternoon, with 30-year yields climbing four basis points to 3.42% and the 10-year benchmark jumping two basis points to 2.54%. The two-year notes rose one basis point to 0.35%.
