A slew of new municipal bond deals priced on Tuesday with issuers from Texas and California dominating the primary market. Traders reported that many of the deals were oversubscribed and that they were attractively priced.
About $12 billion of new bonds are scheduled to come to market this week, with most offerings expected to be as well received.
"The deals are going away very well," a Midwest trader said. "There's been a lot of interest in the primary and it's stealing the attention away from the secondary market."
Prices of high-quality muni bonds moved higher, according to Municipal Market Data.
Tuesday's Primary
In Texas, Morgan Stanley priced the Harris County-Houston Sports Authority's $563.013 million tax-exempt and taxable senior lien revenue refunding bonds and second lien revenue refunding bonds.
The $347.83 million of Series A tax-exempt senior lien revenue refunding current interest bonds were priced to yield from 1.26% with a 5% coupon in 2018 to 3.95% with a 5% coupon in 2053. The series is rated A2 by Moody's Investors Service and A-minus by Standard & Poor's except for the 2022-2027 maturities which are rated A2 by Moody's and double-A by S&P.
The $91.343 million of Series A capital appreciation bonds were priced to yield from 4.73% in 2041 to 4.97% in 2053. The CABs are insured by Assured Guaranty Municipal Corp. and rated A2 by Moody's and double-A (A-minus underlying) by S&P.
The $47.495 million of Series 2014 B taxable senior lien revenue refunding bonds were priced to yield 70 basis points above Treasuries in 2016, 85 basis points above Treasuries in 2017, 75 basis points above Treasuries in 2018 with the 2015 maturity being offered as a sealed bid. The bonds are rated A2 by Moody's and A-minus by S&P.
The $76.345 million of Series 2014 C second lien revenue refunding bonds were priced to yield from 0.58% with a 2% coupon in 2015 to 3.77% with a 5% coupon in 2034. The bonds are rated A3 by Moody's and triple-B by S&P.
Elsewhere in the Lone Star State, Wells Fargo Securities priced Dallas' $531.66 million general obligation refunding and improvement bonds. The bonds were priced to yield from 0.07% with a 5% coupon in 2015 to 3.26% with a 4% coupon in 2034. The bonds are rated Aa1 by Moody's and AA-plus by S&P.
The deal includes new money and refunding for bonds issued in 2005, 2007, and 2008. The city is also taking out $26.5 million of commercial paper. With this deal, Dallas will have about $1.8 billion of GO debt outstanding, according to Moody's. About $20 million of this issue will go toward the Trinity River Corridor, a project approved by voters in 1998 to transform the neglected river near downtown into more accessible park space.
Meanwhile in California, Bank of America Merrill Lynch priced $513 million Bay Area Toll Authority bonds in two separate issues.
The $431.1 million of San Francisco Bay Area toll bridge senior lien revenue bonds were priced in four series. The $143.73 million of term-rate Series D bonds were priced to yield 1.85% with a 1.875% coupon in 2034. The bonds have a mandatory tender date of 2020. The $143.675 of million term-rate Series E bonds were priced to yield 2.07% with a 2% coupon in 2034. The bonds have a mandatory tender date of 2021. The $71.865 million of index-rate Series G bonds were priced to yield 60 basis points over the SIFMA rate in 2034. The bonds have a mandatory tender date of 2020. The $71.83 million of index-rate Series H bonds were priced to yield 70 basis points over the SIFMA rate in 2034. The bonds have a mandatory tender date of 2021. The issue is rated Aa3 by Moody's, double-A by S&P and double-A-minus by Fitch.
The $82.53 million San Francisco Bay Area toll bridge senior lien fixed-rate revenue bonds, Series F-2, were priced to yield from 1.15% with a 3% coupon in 2019 to 1.68% with a 4% in 2021. The issue is rated Aa3 by Moody's, double-A by S&P and double-A-minus by Fitch.
Separately, JPMorgan Securities priced $25 million of Bay Area Toll Authority, San Francisco Bay Area, subordinate toll bridge revenue bonds, Series S-5. The bonds were priced at par to yield 2.50% in a bullet maturity of 2054. The issue is rated A1 by Moody's and A-plus by S&P.
Elsewhere in the Golden State, Bank of America Merrill Lynch priced the California Statewide Communities Development Authority's $549.505 million of tax-exempt revenue bonds for the Loma Linda University Medical Center. The bonds were priced to yield from 4.23% with a 5.25% coupon in 2029 to 5% with a 5.50% coupon in 2054. The deal is rated triple-B by S&P and triple-B-minus by Fitch Ratings.
In other negotiated action, Bank of America Merrill Lynch priced the Northeast Ohio Regional Sewer District's $414.55 million wastewater improvement revenue and refunding bonds. The issue was priced as serials and terms to yield from 0.74% with a 4% coupon in 2017 to 3.52% with a 3.375% coupon in 2034. Top yields came in a split 2049 maturity that was priced at par to yield 4% and priced as 5s to yield 3.38%. The bonds are rated Aa1 by Moody's and AA-plus by S&P. "We've had a really good two weeks," the Midwest trader said. "Our deals had a good reception. And I expect one more week of good primary issuance before the holidays hit."
Secondary Market
High-grade municipal bond prices were higher on Tuesday. The yield on the benchmark 10-year general obligation fell five basis points to 2.02% from 2.07% on Monday while the yield on 30-year GOs dropped four basis points to 2.92% from 2.96%, 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 0.62% from 0.63% on Monday. The 10-year yield dropped to 2.22% from 2.25% while the 30-year decreased to 2.87% from 2.90% on Monday.
The 10-year muni-to-Treasury ratio closed at 91.0% versus 91.7% on Monday; the 30-year muni to Treasury ratio closed at 101.5%, compared with 102.0% on Monday.
MSRB: Previous Session's Activity The Municipal Securities Rulemaking Board reported 33,772 trades on Monday for volume of $7.444 billion. Most active on Monday, based on the number of trades, were the New Jersey Transportation Trust Fund Authority transportation program bonds, Series AA 4 1/4s of 2044, which traded 155 times with an average price of 99.639 and an average yield of 4.256%.
Richard Williamson contributed to this report.
