Market participants said the $258.9 million part of the scheduled $508.9 million Texas Public Finance Authority refunding general obligation deal was priced fairly on Tuesday, as a spate of issuance from the Lone Star State got underway.
JPMorgan Securities priced $258.9 million of Texas PFA refunding GOs with yields ranging from 0.16% with a 2% coupon maturing in 2015 to 3.45% with a 4% coupon maturing in 2033. There is a sealed bid in 2015. The bonds are callable at par in 2024.
"It seems like pretty good execution to me; it's definitely an issuers' market," a Midwest trader said. The $250 million part of the deal will price on Wednesday.
The entire deal is triple-A rated by Moody's Investors Service, Standard & Poor's and Fitch Ratings.
The $117.7 million Dallas-Fort Worth International Airport joint-revenue improvement bonds expected this week are also generating interest because the credit tends to come at a wider spread than triple-A bonds issued by the state of Texas.
"That DFW deal, [the airport] sector of the market has been getting a lot of attention because it carries a little bit more yield than high grade," a trader in Dallas said. "It will get attention because of its spread."
The Midwest trader said it "makes sense" to look to DFW to pick up some yield. "From a spread standpoint the PFA would come 15 off, 18 off, and that sounds okay, so I think the DFW deal will come much wider," he said.
"I think the DFW deal will carry a bit more yield," the trader in Texas said.
He said DFW's May issuance will not lessen investors' demand for the bonds, because DFW has been a frequent issuer over the years and is a credit the buy-side is comfortable with. "DFW is a spread name; it will be fine," a trader in Chicago said.
The Texas PFA did receive high demand, though, according to market participants. "Most of our focus this week is on Texas paper," the Dallas trader said. "I think the larger Texas deal will get everyone's attention just because of the size. The Texas PFA deal, from a credit and yield standpoint, will probably generate a lot of attention"
JPMorgan won the bid for $390.2 million and $369.3 million of the $1.1 billion New York State Dormitory Authority revenue bonds deal on Tuesday, the largest competitive offering of the week.
The remaining $325.4 million 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. "I think [DASNY's pricing] seems a little tight to be honest," the Midwest trader said. "But it came competitively and that's a big deal so it's going to come tight. It's not a big surprise, and seems like stuff is clearing fine."
The bonds are callable at par in 2024.The deal is rated AAA by S&P and AA-plus by Fitch Ratings.
The trader in the Midwest said that New York's recent credit upgrades may also have led to the sale being priced tightly.
On Friday 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. The Metropolitan Transportation Authority of New York was upgraded on Wednesday by S&P to AA-minus from AA-plus.
"With the MTA upgrade the DASNY deal will be met with ample demand," the trader in Chicago said this morning. "We've had the New York state upgraded and MTA upgrade so from a credit trend New York state credits are doing better."
DASNY did issue $198.6 million of school-district financing program revenue bonds just last month, and New York City issued a two-part GO deal that was upsized to $1.02 billion during its institutional sale on June 11. While investors are saturated with New York credit, market participants still see buyers grabbing the upcoming DASNY bonds.
"The New York City deal, despite some political negativity, did very well, and with this [DASNY] deal there is less of a political issue," a trader in Florida said. He said that retail's appetite for the bonds will also drive demand.
"New York City in particular is one of the biggest pools of cash, especially for individual investors who have no choice but to buy New York," he said. He predicted that the bonds will be bought primarily by New York residents, mutual funds, money managers, and insurance companies.
The trader in Chicago said the deal is likely to attract some buyers because investors have more cash on hand during the spring and summer reinvestment period. During reinvestment period market participants receive cash from June 1, June 15 and July 1 coupon payments and bonds maturing.
JPMorgan priced $100 million of Municipal Gas Authority of Georgia revenue bonds. Yields ranged from 0.26% with a 4% coupon in 2015 to 2.83% with a 5% coupon in 2024. There is no optional call. The deal is rated AA-minus by S&P and A-plus my Fitch.
Munis mostly strengthened Tuesday. Yields on the short-end of the curve fell as much as one basis point and those maturing beyond 2018 slipped as much as two basis points, according to Municipal Market Data's scale. Yields on bonds maturing in two to three years were steady.
According to the Municipal Market Advisor 5% triple-A scale, muni yields on the short end held steady at 0.33%. The 10-year benchmark yield fell one basis point to 2.30%, while the 30-year yield dropped two basis points to 3.50%.
Treasuries were mixed Tuesday, with the 30-year yield falling four basis points to 3.41% and the 10-year benchmark slipping three basis points to 2.59%. q
The two-year note ticked up one basis point to 0.47%.
