Low issuance boosted the appeal to investors of Tuesday's two competitive headline deals, a $978 million sale of Georgia general obligation bonds and a $400 million issue Port Authority of New York and New Jersey consolidated bonds.
Issuance this week is scheduled to total $6.4 billion, down from $9.29 billion last week, according to data provided by The Bond Buyer and Ipreo. This drop helped make the both deals more attractive, as investors sought supply in different parts of the credit spectrum. The Georgia GOs received triple-A ratings from the three major rating agencies and the Port Authority bonds earned Aa3 by Moody's Investors Service and AA-minus by both Standard & Poor's and Fitch Ratings
"Our calendar is fairly light in terms of stuff people are bidding on," a trader on the west coast said. "I think things are priced pretty aggressively because of the high demand."
Volume has remained low this year totaling $115.2 billion as of May 31, down from $153 billion for the same period in 2013. The low supply has pushed up demand for bonds and allowed underwriters to price deals, especially competitive deals, very aggressively.
"I think [the Georgia deal is at] a good number," a trader in Chicago said. "It was impressively bid and dealers happen to do that with competitive now because there is less and less negotiated supply. People have to find something to eat."
Bank of America won the bid for $325.4 million of GOs. Yields ranged from 2.44% with a 5% coupon in 2025 to 3.43% with a 4% coupon in 2034. The bonds are callable at par in 2024.
Wells Fargo won the bid for $324.6 million of GOs. Yields ranged from 0.095% with a 5% coupon in 2015 to 2.29% with a 5% coupon in 2024. There is no call option.
JPMorgan Securities won the bid for $163 million of GOs. Yields ranged from 0.085% with a 5% coupon in 2015 to 0.95% with a 5% coupon in 2018. There is no call option.
Citigroup won the bid for $151.1 million of GOs.
Raymond James won the bid for $13.8 million GOs.
"The short-term GO part of the Georgia issuance came out pretty rich, but on scale," a trader in New York said. "But the MMD one-year is around 0.15% but that's on scale. [So the Georgia GO pricing is] not terribly surprising considering lack of paper and demand for paper."
The $400 million Port Authority of New York and New Jersey consolidated bonds also received high-demand even though they are not triple-A paper, and were called "liquid" by investors despite a Securities and Exchange Commission probe into about $1.8 billion of controversial spending by the agency.
Morgan Stanley won the bid for the bonds, which have yields ranging from 2.73% with a 5% coupon in 2025 to 4% with a 4% coupon in 2044.
"[With Port Authority] you get New York City and New Jersey buyers, so it has nice liquidity," a trader in New York said. "It's priced decently. I'm sure the selloff did not help out, but in retrospect I don't think was too bad."
Last week the Port Authority revealed in its preliminary official statement the SEC and other regulation authorities are investigating whether the authority was justified in spending money it raised for New Jersey repair projects not within its jurisdiction.
The deal is rated Aa3 by Moody's and AA-minus by both S&P and Fitch. The bonds are callable at par in 2044.
Traders said that because everything is coming priced so richly to market, A and AA paper may start receiving more demand than the safer triple-A bonds because they offer more yield.
"You're seeing everyone float down to lower-grade paper," the trader in New York said.
The trader in Texas called the low AA and single A the "hottest part of the market".
"You will see this more and more, buyers ready to move down credit section a little bit to pick up a little extra yield," a trader in Virginia said.
Citigroup Global Markets was expected to price $590 million of Oregon tax anticipation notes on Tuesday. The deal is rated MIG 1 by Moody's, SP-1-plus by S&P and F1-plus by Fitch.
J Morgan priced a total $234.3 million of New York City Housing Development Corp. revenue bonds. Yields on $225 million were priced at par to yield from 0.40% in 2016 to 4.30% in 2047. The bonds are callable at par in 2023 excluding bonds maturing from 2016 to 2018. Yields on $9.2 million were priced at par to yield 1% in 2018 and is callable at par in 2016. The deal is rated Aa2 by Moody's and AA by S&P.
Goldman Sachs priced $104.9 million of New Orleans water revenue and refunding bonds. Yields ranged from 1% with a 5% coupon in 2016 to 4.43% with a 5% coupon in 2044. The bonds are callable at par in 2024 and are rated BBB-plus by S&P and BBB by Fitch.
In the competitive market, Citigroup Global Markets won the bid for $135.6 million of Seattle, Wash., revenue bonds. Yields ranged from 0.14% with a 3% coupon in 2015 to 3.82% with a 4% coupon in 2039. The bonds are callable at par in 2024 and are rated Aa1 by Moody's and AA-plus by S&P.
Munis weakened Tuesday, with bonds maturing in six to nine years rising one basis point. Yields maturing in 10 to 13 years grew two basis points and those maturing beyond 2029 climbed one basis point. Short-term yields were unchanged.
