NEW YORK – The municipal market was mostly flat Monday amid fairly light secondary trading activity, ahead of a slate of primary market activity this week set to top $9 billion.
“There wasn’t a whole lot to speak about today, but there’s a pretty decent calendar out there this week nationally,” a trader in Los Angeles said. “There should be a bit of a focus on the primary this week. As far as today goes, I don’t really see how you call it anything but flat. We’ve had a fair amount of volatility over the last few weeks, but today we’re just unchanged.”
The Municipal Market Data triple-A scale yielded 2.32% in 10 years Monday, while the 20-year scale held at its record low of 3.28%, both matching Friday’s levels. The scale for 30 year debt yielded 3.70%, also matching Friday.
The 20-year low of 3.28%, which was matched Thursday, Friday, and Monday, was originally set Aug. 31. Yields on the 10-year and 30-year triple-A scale bottomed out at 2.17% and 3.67%, respectively, on Aug. 25.
Monday’s triple-A muni scale in 10 years was at 92.1% of comparable Treasuries and 30-year munis were at 100.0%, according to MMD, while 30-year tax-exempt triple-A general obligation bonds were at 111.1% of the comparable London Interbank Offered Rate.
The Treasury market showed gains Monday. The benchmark 10-year note was quoted recently at 2.52% after opening at 2.61%.
The 30-year bond was quoted recently at 3.70% after opening at 3.80%. The two-year note was quoted recently at 0.43% after opening at 0.44%.
As the third quarter begins to wind down this week, long-term volume is expected to improve slightly, with several significantly sized deals from state and local governments contributing to $9.42 billion in estimated new issuance earmarked for pricing in the primary market, according to Ipreo LLC and The Bond Buyer.
This week's calendar is expected to increase by $1.26 billion from a revised $8.16 billion last week, according to Thomson Reuters.
The Dallas Area Rapid Transit Authority will test the waters with its recently downgraded senior-lien sales tax revenue credit when it issues $829 million of the bonds in the week's largest deal.
The authority lost its coveted triple-A rating from Standard & Poor's on Sept. 17 when the rating agency lowered its rating and underlying rating on approximately $2.6 billion of outstanding senior-lien sales tax revenue bonds to AA-plus from AAA with a stable outlook.
Standard & Poor's assigned its AA-plus long-term rating and stable outlook to this week's deal, which senior-manager Bank of America Merrill Lynch will offer to retail investors on Monday ahead of Tuesday's official pricing.
The financing consists of $95 million of Series 2010 A tax-exempt senior-lien bonds and $729 million of Series 2010 taxable Build America Bonds. Moody's Investors Service rates the DART bonds Aa2.
The downgrade by Standard & Poor's was prompted by an 8.4% decline in sales tax revenue, to $378.4 million in fiscal year 2009, and additional declines expected in fiscal 2010 - both of which could lead to reduced coverage levels - as well as an acceleration in the transit system's bonding program, said analyst Russell Bryce.
"Because DART relies on sales tax revenues to support operations, we believe that it would be unlikely that farebox revenues would be available for debt service if sales tax collections declined below the level of required debt-service payments," Bryce wrote.
In the new-issue market Monday, Citi priced for retail investors $237.5 million of electric system revenue bonds for Florida’s Jacksonville Electric Authority in three series.
Bonds from the larger $144.5 million series mature from 2011 through 2031, with yields ranging from 0.60% with a 3% coupon in 2011 to 4.28% with a 4.125% coupon in 2030. Bonds maturing in 2028, 2029, and 2031 were not offered during the retail order period. The bonds are callable at par in 2015.
Bonds from the $78.9 million series mature from 2011 through 2030 with a term bond in 2038. Yields range from 0.60% with a 3% coupon in 2011 to 4.40% with a 4.25% coupon in 2038. Bonds maturing from 2022 through 2024 and from 2027 through 2029 were not offered during the retail order period. The bonds are callable at par in 2020, except bonds maturing in 2020, which are not callable.
Bonds from the $14.1 million series mature from 2020 through 2026. None of these bonds were offered during the retail order period. The bonds are callable at par in 2020.
The credit is rated Aa3 by Moody’s, A-plus by Standard & Poor’s, and AA-minus by Fitch.
Citi priced for retail investors $224.9 million of revenue refunding bonds for the Southeastern Pennsylvania Transportation Authority.
The bonds mature from 2011 through 2028, with yields ranging from 0.80% with a 2% coupon in 2012 to 3.77% with a 3.7% coupon in 2028. Bonds maturing in 2011 will be decided via sealed bid. Bonds maturing from 2023 through 2027 were not offered during the retail order period.
The bonds, which are callable at par in 2020, are rated A1 by Moody’s, AA-minus by Standard & Poor’s, and AA by Fitch.
JPMorgan priced for retail investors $180 million of transportation excise tax revenue bonds for the Arizona Transportation Board.
The bonds mature from 2011 through 2025, with yields ranging from 0.55% with a 3% coupon in 2012 to 3.13% with a 5% coupon in 2025. Bonds maturing in 2011 will be decided via sealed bid. Bonds maturing from 2021 through 2024 were not offered during the retail order period.
The bonds, which are callable at par in 2020, are rated Aa1 by Moody’s and AA-plus by Standard & Poor’s.
Also, Citi priced for retail investors $173.4 million of revenue bonds for Henrico County, Va., in four series.
Bonds from the $40.3 million Series B-1 mature in 2031, 2032, and 2042, yielding 4.70% with a 4.625% coupon, 4.75% with a 4.625% coupon, and 4.875% with a 4.75% coupon.
Bonds from the $40.4 million Series B-2 mature in 2031, 2032, and 2042, yielding 4.70% with a 4.625% coupon in 2031 and 4.75% with a 4.625% coupon in 2032. Bonds maturing in 2042 were not offered during the retail order period.
Bonds from the $46.4 million Series C-1 mature in 2031, 2032, and 2042, yielding 4.70% with a 4.625% coupon in 2031 and 4.75% with a 4.625% coupon in 2032. Bonds maturing in 2042 were not offered during the retail order period.
Bonds from the $46.2 million Series C-2 mature in 2031, 2032, and 2042, yielding 4.70% with a 4.625% coupon in 2031 and 4.75% with a 4.625% coupon in 2032. Bonds maturing in 2042 were not offered during the retail order period.
All the bonds, which are insured by Assured Guaranty Corp., are callable at par in 2020, except bonds maturing in 2031. The underlying credit is rated A3 by Moody’s and A-minus by both Standard & Poor’s and Fitch.
The economic calendar was light Monday.
Visible Supply
The Bond Buyer’s 30-day visible supply rose $77.2 million to $14.014 billion. The total is comprised of $2.742 billion of competitive bonds and $11.272 billion of negotiated bonds.
Previous Session's Activity
The Municipal Securities Rulemaking Board reported 31,783 trades of 12,919 issues for volume of $11.49 billion. Most active was Arizona School Facilities Board 6s of 2027 that traded 139 times at a high of 102.250 and a low of par.
