NEW YORK – The municipal market was slightly firmer Tuesday as Illinois accelerated pricing its $1.5 billion tobacco bond sale after seeing high demand for the debt during Monday’s retail order period.
“We’re getting a little bit of a bump on the long end, but we’re mostly flat inside say 20 years,” a trader in New York said. “There’s some decent activity in the secondary, and we’re better maybe a basis point or two out long, but there isn’t a whole lot of movement throughout the curve. People are mostly focusing on the primary.”
In the new-issue market Tuesday, Citi priced $1.5 billion of tobacco settlement revenue bonds for Illinois’ Railsplitter Tobacco Settlement Authority.
The deal, which was expected to be priced Wednesday, was moved up a day after a strong retail order period Monday saw substantially more than the $300 million allotted sold to retail investors, according to market sources.
The bonds mature from 2012 through 2021, with term bonds in 2023, 2024, and a split term maturity in 2028. Yields range from 2.20% with a 3% coupon in 2012 to 6.20% with a 6% coupon in 2028.
The bonds are callable at par in 2021, except bonds maturing in 2024, which are callable at par in 2016. The credit is rated A by Standard & Poor’s and BBB-plus by Fitch Ratings.
Additionally, market sources indicated Citi has delayed pricing its $840 million Port Authority of New York and New Jersey offering until Wednesday due to the acceleration of the Illinois tobacco pricing.
The Municipal Market Data triple-A scale yielded 2.79% in 10 years Tuesday, three basis points lower than Monday’s 2.82%, while the 20-year scale yielded 3.94%, down three basis points from Monday. The scale for 30-year debt also declined three basis points, to 4.28% from Monday’s 4.31%.
Tuesday’s triple-A muni scale in 10 years was at 99.6% of comparable Treasuries and 30-year munis were at 103.9%, according to MMD. Meanwhile, 30-year tax-exempt triple-A general obligation bonds were at 111.7% of the comparable London Interbank Offered Rate.
The Treasury market showed mild gains Tuesday. The benchmark 10-year note was quoted recently at 2.81% after opening at 2.82%. The 30-year bond was quoted recently at 4.13%, after opening at 4.14%. The two-year note was quoted recently at 0.47% after opening at 0.51%.
Elsewhere in the new-issue market Tuesday, JPMorgan priced $492.7 million of taxable Build America Bonds for the Los Angeles Department of Water and Power.
The BABs mature in 2041 and 2050, yielding 7.003% and 6.603%, respectively, or 4.55% and 4.29% after the 35% federal subsidy.
The bonds were priced to yield 290 and 250 basis points over the 30-year Treasury yield, respectively, and contain a make-whole call at Treasuries plus 40 basis points.
The credit is rated Aa2 by Moody’s Investors Service, AA by Standard & Poor’s, and AA-plus by Fitch.
Wells Fargo Securities took indications of interest on $672.3 million of taxable and tax-exempt debt for Ohio’s American Municipal Power, Inc.
Bonds from the $609.4 million series of taxable BABs mature from 2020 through 2022 and in 2027, 2035, and 2050. The bonds are priced to yield between 215 and 287.5 basis points over the corresponding Treasury yields.
Bonds from the $38.4 million series of traditional taxable bonds mature from 2016 through 2020, and are priced to yield between 200 and 240 basis points over the corresponding Treasury yields.
Bonds from the $20.0 million series of taxable new clean renewable energy bonds mature in 2029 and are priced to yield 235 basis points over the 30-year Treasury yield.
Also, bonds from the $4.5 million tax-exempt series mature in 2020, and are priced to yield 4.00% with a 5% coupon.
The credit is rated A3 by Moody’s and A by both Standard & Poor’s and Fitch.
Wells Fargo also priced $131.0 million of waterworks and sewer system refunding and capital improvement revenue bonds for Charleston, S.C.
The bonds mature from 2012 through 2030, with term bonds in 2035, 2036, and 2041. Yields range from 0.61% with a 5% coupon in 2012 to 4.55% with a 5% coupon in 2041.
The bonds, which are callable at par in 2021, are rated Aa1 by Moody’s, AAA by Standard & Poor’s, and AA-plus by Fitch.
Also, Knoxville, Tenn., competitively sold $70 million of taxable BABs to Ramirez & Co., at a true interest cost of 3.76%.
The BABs mature from 2012 through 2018 and from 2021 through 2027, with term bonds in 2030, 2035, and 2040. Yields range from 2.50% with a 2.74% coupon in 2015, or 1.63% after the 35% federal subsidy, to 6.10% priced at par in 2040, or 3.97% after the subsidy. Bonds maturing from 2012 through 2014, from 2021 through 2023, and in 2030 and 2035 were not formally re-offered.
The bonds are callable at par in 2021, except bonds maturing in 2040, which are callable at par in 2023. The credit is rated Aa2 by Moody’s and AA-plus by Standard & Poor’s.
In economic data released Tuesday, the Chicago Purchasing Managers’ Business Barometer rose to 62.5 in November from 60.6 in October.
The data is compiled on a seasonally adjusted basis. An index reading below 50 signals a slowing economy, while a level above 50 suggests expansion.
Economists polled by Thomson Reuters predicted a 60.0 reading for the indicator.
The consumer confidence index climbed to 54.1 in November from a downwardly revised 49.9 last month. The October index was originally reported as 50.2.
Economists polled by Thomson Reuters predicted the index would be 52.0.
Visible Supply
The Bond Buyer’s 30-day visible supply rose $523.7 million to $17.249 billion. The total is comprised of $3.038 billion in competitive bonds and $14.211 billion in negotiated bonds.
Previous Session’s Activity
The Municipal Securities Rulemaking Board reported 43,532 trades of 15,747 issues for total volume traded of $10.20 billion on Monday. The most actively traded bond was taxable California BABs 7.7s of 2030, which traded 359 times at a high of 104.750 and a low of 100.594.
