The $1.4 billion Los Angeles tax and revenue anticipation note deal and the $1.2 New York State Dormitory Authority deal seized market participants' focus this week.
Demand for both was boosted by California and New York credit upgrades that occurred shortly before the bonds were sold.
The LA notes were priced on Thursday by Ramirez & Co. to yield 0.11% with a 1.50% coupon. Investors said the notes were quickly bought up because California bonds became more attractive after Moody's Investors Service upgraded the state's general obligation bonds to Aa3 from A1 on Wednesday.
DASNY's bonds were auctioned on Tuesday in a four-part deal. On June 20 Fitch upgraded New York State's GO rating to AA-plus from AA, after Moody's raised New York State's GO bond rating one notch to Aa1 on June 16.
While investors expressed some concern that the market had been flooded with New York credits lately, the state's improved rating drew investors to the bonds.
JPMorgan won the bid for $386.6 million and $366.7 million of the $1.1 billion New York State Dormitory Authority revenue bonds deal on Tuesday. The $386.6 million section had yields ranging from 3.5% with a 5% coupon in 2035 to 3.7% with a 5% coupon in 2044. The $366.7 million portion had yields from 0.3% with a 4% coupon in 2016 to 2.23% with a 5% coupon in 2022. The $322.64 million section was awarded to Bank of America. Yields ranged from 2.70% with a 5% coupon in 2025 to 3.48% with a 5% coupon in 2034.
The bonds are callable at par in 2024
The final $81.4 part of the deal was awarded to Goldman Sachs, and had yields ranging from 0.66% with a 0.66% coupon in 2016 to 3.08% with a 3.08% coupon in 2024.
The deal is rated AAA by S&P and AA-plus by Fitch Ratings.
Puerto Rico trading jumped this week with trading reaching to 137.1% above its 100-day average on Friday, according to Bloomberg data. Trading increased after the legislature passed a law to allow public corporations to restructure their debt,
Bids and offers for Puerto Rico Highway and Transportation Authority’s Transportation revenue bonds with a 5.5% coupon in came in at about 21% Friday, according to data from Markit. They soared as high as 25% for highway authority bonds with a 5% coupon in 2021. Puerto Rico Energy and Power Authority bids and offers came in at almost 30% for bonds with a 5.5% coupon in 2018 and as high as 45% for bonds with a 5% coupon in 2016.
On Friday Citigroup Global Markets priced $351.3 million of Western Minnesota Municipal Power Agency revenue bonds. Yields ranged from 0.85% with a 3% coupon in 2018 to 3.67% with a 5% coupon in 2046. The bonds are callable at par in 2024. The deal was rated Aa3 by Moody's Investors Service and AA-minus by Fitch Ratings.
Municipal bond yields continued to fall on Friday dropping by two basis points for bonds maturing in three-to four-years, and by one basis point for bonds maturing in five-to 30-years, according to Municipal Market Data's triple-A scale. The front end of the curve held steady.
The market began strengthening on Wednesday after the revised GDP announcement showed the economy contracted by 2.9%, the most since the first quarter of 2009. Fixed income generally performs well when unfavorable economic data is reported.
Treasuries were mixed Friday, with the 30-year yield and the 10-year benchmark inching up one basis point to 3.37% and 2.54%, respectively. The two-year note slipped one basis point to 0.47%.
