The municipal bond market saw more supply priced on Wednesday with the Los Angeles, Calif., Community College District coming to market with almost $3 billion of bonds, the largest sale of the week. High-grade municipal bond prices were little changed, according to Municipal Market Data.
Many market participants say the past two weeks' new issues have priced attractively and been getting a lot of attention.
"There's a lot of variety in this week's issues," said Dawn Mangerson, managing director at McDonnell Investment Management. "There is a nice mix of size and sectors."
She said the deals have "all gone very well" and added that she was most surprised by the high interest shown for the $529 million Dallas, Texas, general obligation bond issue that priced on Tuesday.
"I heard it was from five to 10 times oversubscribed," she said. "There was so much demand that it was crazy."
PRIMARY MARKET
On Wednesday, about $2.8 billion of bonds were priced for the LA CCD, consisting of both tax-exempt and taxable issues.
Morgan Stanley priced the district's $1.797 billion tax-exempt general obligation and general obligation refunding bonds. This deal is comprised of new-money and refunding bonds.
The $300 million 2008 election tax-exempt Series G GOs were priced to yield from 0.25% in 2016 with a 2% coupon to 3.42% with a 4% coupon in 2039. The $1.497 billion tax-exempt Series A GO refunding bonds were priced to yield from 0.25% with a 3% coupon in 2016 to 3.19% with a 4% coupon in 2033.
Ramirez & Co. priced the $97.075 million taxable portion of the LA CCD issue. The $50 million 2008 election taxable Series H GOs were priced at par to yield 0.297% in 2015. The $47.075 million taxable Series B GO refunding bonds were priced at par to yield from 0.297% in 2015 to 3.129% in 2024.
Both issues are rated Aa1 by Moody's Investors Service and AA-plus by Standard & Poor's.
JPMorgan priced the Massachusetts Clean Water Trust's $228.355 million green bonds. The Series 18 non-AMT state revolving fund bonds were priced to yield from 0.17% with a 2% coupon in 2016 to 3.04% with a 5% coupon in 2045. The issue is rated triple-A by Moody's, S&P and Fitch Ratings.
JPMorgan priced the $346 million New York City Housing Development Corp. multi-family housing revenue bonds. The bonds were priced at par to yield from 0.20% and 0.25% in a 2015 split maturity to 4.00% in 2048. The issue is rated Aa2 by Moody's and AA-plus by S&P.
Bank of America Merrill Lynch priced $145.89 million Palm Beach County, Fla., School Board's certificates of participation. The COPs were priced to yield from 0.65% with a 5% coupon in 2017 to 3.05% with a 5% coupon in 2031.
In the competitive arena, JP Morgan won the $200 million Baltimore County, Md., metropolitan district and consolidated public improvement bonds with a true interest cost of 3.0093%.
The $84 million metropolitan district bonds were priced to yield from 0.13% with a 2% coupon in 2015 to 2.92% with a 5% coupon in 2044. The $116 million consolidated public improvement bonds were priced to yield from 0.32% with a 4% coupon in 2016 to 2.64% with a 5% coupon in 2034. The issue is rated triple-A by Moody's, S&P and Fitch.
SECONDARY MARKET
High-grade municipal bond prices were slightly higher on Wednesday. The yield on the benchmark 10-year general obligation was off one basis point to 2.01% from 2.02% on Tuesday while the yield on 30-year GOs dropped two basis points to 2.90% from to 2.92%, according to the final read of Municipal Market Data's triple-A scale.
Treasury prices were higher, with the two-year note yield declining to 0.58% from 0.62% on Tuesday. The 10-year yield dropped to 2.18% from 2.22% while the 30-year decreased to 2.85% from 2.87% on Tuesday.
The 10-year muni-to-Treasury ratio closed on Wednesday at 93.1% versus 91.0% on Tuesday; the 30-year muni to Treasury ratio closed at 102.6%, compared with 101.5% on Tuesday.
PUERTO RICO TRADING
The Bond Buyer reported on Wednesday that Puerto Rico Gov. Alejandro García Padilla hasn't yet decided whether he will sign an oil tax hike approved by the legislature. Along with the tax increase, the bill would allow the Puerto Rico Infrastructure Finance Authority sell up to $2.9 billion of bonds to shore up the Puerto Rico Highways and Transportation Authority's finances.
"Flies in the ointment are an interest rate cap of 8.5% and a price floor of 93 included in the legislation, limiting the yield," Alan Schankel, managing director at Janney Capital Markets, writes in a research report. "With these constraints, a 10-year bond would yield 9.64%, a 20-year bond 9.28% and a 30-year bond 9.19%. PR GO 8% of 2035, issued in March, have been trading at yields in the 9.60% area recently, so it seems unlikely that these constraints would allow marketing at a yield sufficient to attract investors."
Looking at recent market activity, Puerto Rico HTA Series N 5 1/4s of 2036 traded 19 times on Wednesday on volume of $2.935 million with a high/low price of 103.781/100.51 and a high/low yield of 5.21%/4.962%, according to the Municipal Securities Rulemaking Board's EMMA website. In contrast, on Monday the bonds traded nine times on volume of $6.015 million with a high/low price of 101.50/97.863 and a high/low yield of 5.419%/5.133%.
Puerto Rico HTA 5 1/4s Series N of 2039 traded 10 times on Tuesday on volume of $1.455 million with a high/low price of 70.00/67.806 and a high/low yield of 8.355%/8.077%, according to EMMA. In contrast, on Monday the bonds traded four times on volume of $440,000 with a high/low price of 68.75/68.15 and a high/low yield of 8.311%/8.234%.
REPORT: ATLANTIC CITY MAY SELL NOTES THIS MONTH
Atlantic City, N.J., may cut the size of a planned bond sale, turn it into a note sale and sell it before the end of the year, according to a published report,
The city had planned to sell $140 million of refunding bonds last month, but the delayed deal may now be turned into a $40 million note sale, Reuters quoted city revenue director Michael Stinson as saying.
Reuters said the deal was changed because the financial uncertainties surrounding the closure of several casinos have made it difficult for the city to borrow money.
MSRB: PREVIOUS SESSION'S ACTIVITY
The Municipal Securities Rulemaking Board reported 38,993 trades for Tuesday on volume of $11.487 billion. Most active on Tuesday, based on the number of trades, was the New Jersey Transportation Trust Fund Authority transportation program bonds, Series AA 4 1/4s of 2044, which traded 138 times with an average price of 100.059 and an average yield of 4.212%.
