New York State Environmental Facilities Corp.'s sale of $213.2 million of revolving funds revenue bonds attracted demand in a softening municipal bond market Tuesday, as investors gravitated to debt from the infrequent issuer.
The Bond Buyer last reported on a NYEFC deal that totaled over $100 million in June 2011 when Bank of America Merrill Lynch priced $193 million of state revolving funds revenue bonds. Munios lists a $35 million sale of water facilities revenue bonds in July 2010 as NYEFC's last recorded deal.
"The city does issue a fair amount, and the Dorm Authority, but you don't get these water bonds quite as often," the trader in New York said.
JPMorgan on Tuesday priced the NYEFC bonds at yields ranging from 0.10% with a 1% coupon in 2014 to 3.46% with a 5% coupon in 2044.There is a sealed bid in 2014 and two in 2015. The bonds are callable at par in 2024.
The deal includes term bonds maturing serially from 2028 to 2036 and a term bonds in both 2039 and 2044.
The bonds received triple-A ratings from Moody's Investors Service, Standard & Poor's and Fitch Ratings.
The bonds' high ratings further boosted their appeal to investors, market participants said.
"Its high-grade clean water, it's very high-grade, so it won't have much trouble getting done," a trader in Virginia said.
"It's a natural triple-A, there's not a lot of natural New York, triple-A paper around," a trader in New York added.
Investors said other deals that were priced on Tuesday or are scheduled to price this week will be well received. Two of the larger negotiated deals are especially attractive because they consist of certificates of participation, which that offer a diversification opportunity, they said.
"There is some value in subordination, not necessarily buying state GOs, but purchasing certificates of participation," Fred Bacani, Head of Fixed Income & Trading at Veritable LP in Newtown Square, Pa., said in an interview.
JPMorgan Securities is expected to price $431.16 million of Colorado Transportation District COPs, which earned Aa3 from Moody's Investors Service and A from Standard & Poor's and Fitch Ratings.
Bank of America Merrill Lynch sold $226.13 million Arizona School Facilities Board COPs on Tuesday. The bonds came in three taxable series the largest of which totaled $110.7 million with maturities ranging from 2015 with a 0.32% coupon to 2017 with a 1.47% coupon.
Yields on $110.7 million part ranged from 0.9454% coupon maturing in 2016 at par to 1.474% coupon in 2017 at par. There is a sealed bid in 2015. It was priced with a spread of +65 over treasuries.
Yields on $60.4 million ranged from 0.945% coupon in 2016 at par to 2.078% coupon in 2018 at par. It was priced with a spread of +45 over treasuries.
Yields on $55 million ranged from 0.945% coupon in 2016 at par to 2.378% coupon in 2019 at par. It was priced with a spread of 75 basis points over treasuries.
"Potentially [the certificates of participation deals] will offer some incremental yield over GO structure [and] will be enticing for people looking for a little bit more yield," a trader in Virginia said. "In today's market that's usually a good thing."
The trader in Virginia said the value of certificates of participation depends on the strength of the underlying issuer.
"The COP structure is certainly one where we hold and we typically like in the right states," he said. "It really depends on what the underlying issuer is. If you like — have a good outlook on — the underlying issuer and the COP is for an essential purpose like a school, you can get a diversification away from the straight GO structure and can pick up a little bit of yield."
Citi priced $103.4 million of Clark County, Nevada Airport system junior subordinate lien revenue notes. The deal was cut from the original $104 million. There is a 1.140% yield with a 5% coupon in 2018 without a call option. The deal is rated A2 by Moody's.
Municipal bonds sold-off on Tuesday, including a one basis point increase in yield for bonds maturing in two years, a two basis point rise for bonds maturing from three to four years, and a three basis point jump in bonds maturing in five years, according to Municipal Market Data's triple-A scale.
The long-end sold-off more significantly with six-to 12-year maturities' yields increasing by four basis points and 13-to 30-years' by five basis points.The two-year held steady at 0.33%, according to Municipal Market Advisor's data. The 10-year grew by five basis points to 2.24% and the 30-year by four basis points to 3.49%.
Market participants said that munis were following treasuries. Yields on 30-year 10-year Treasuries climbed six basis points each to 3.43% and 2.60, respectively. The two-year note was unchanged at 0.40%.
