Market Close: JeffCo Launches For Retail; Secondary Gains

The municipal bond market ended firmer for a third session on Friday as Jefferson County, Ala., began a retail order period on  $1.8 billion of sewer warrants and traders saw higher bids for bonds in the secondary.

“I am pleasantly surprised by the interest today,” an Atlanta trader said, adding bonds maturing within 10 years are harder to find. “It’s follow-up interest to the good reception on the new deals priced Thursday. It’s not crazy busy but we are getting some business and the bid side is holding in, and there is enough interest on attractive bonds.”

JeffCo took all the attention in the primary market as Citi held the first of two days of retail pricing on the $1.8 billion of sewer revenue warrants. Retail pricing is expected to conclude Monday ahead of institutional pricing Tuesday.

“The spreads looked about where I thought they would come,” an Atlanta trader said. “It’s the cheapest credit besides Puerto Rico.”

The senior lien bonds are rated BBB by Standard & Poor’s and BB-plus by Fitch Ratings. The senior lien series holds insurance from Assured Guaranty Municipal Corp. with a rating of A2 by Moody’s Investors Service and AA-minus by Standard & Poor’s. The subordinate bonds are rated BBB-minus by Standard & Poor’s and BB by Fitch.

The first series of $375 million of senior lien sewer revenue current interest warrants were priced at par to yield 5.5% in 2044, 5.625% in 2048, and 5.75% in 2053. Portions of bonds maturing in 2044, 2048, and 2053 were not offered to retail. The bonds are callable at par in 2023.

The second series of $55 million of senior lien sewer revenue capital appreciation warrants yielded from 6% in 2025 to 6.875% in 2036. Portions of bonds maturing between 2026 and 2035 were not offered for retail.

The third series of $70 million of senior lien sewer revenue convertible capital appreciation warrants yielded 6.5% in 2038 and 6.625% in 2042.

Yields on the fourth series of $837.4 million of subordinate lien sewer revenue current interest warrants ranged from 2.75% with a 5% coupon in 2015 to 6.5% priced at par in 2053. Portions of bonds maturing in 2042, 2051, and 2053 were not offered for retail. The bonds are callable at par in 2023 except those maturing in 2051 which are callable at par in 2018.

The fifth series of $56.4 million of subordinate lien sewer revenue capital appreciation warrants yielded 7.5% in 2028, 7.875% in 2033, and 8% in 2036. Portions of bonds maturing between 2029 and 2037 were not offered for retail.

The sixth series of $402.2 million of subordinated lien sewer revenue convertible capital appreciation warrants yielded 7.5% in 2044. Bonds maturing in 2039, 2047, and 2050 were not offered for retail.

On Friday, the triple-A Municipal Market Data scale ended steady to one basis point stronger. The 10-year was steady at 2.61% and the 30-year yield was flat at 4.13%. The two-year closed unchanged at 0.33%.

Yields on the Municipal Market Advisors benchmark scale ended as much as five basis points stronger in the 10-year to 15-year spot of the curve. The two-year yield slid two basis points to 0.39% and the 10-year yield fell one basis point to 2.69%. The 30-year was steady at 4.33%.

Treasuries were weaker after two consecutive sessions of gains. The two-year and 30-year yields rose one basis point each to 0.30% and 3.80%, respectively. The benchmark 10-year yield rose two basis points to 2.71%.

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