Municipal bond yields were steady Tuesday as the week's biggest deal came to market.
The New York City Transitional Finance Authority issued bonds in the negotiated and competitive markets.
"It's a very recognizable name coming at a good time as lots of people are hungry for bonds," a trader based in Atlanta said. "There has not been an onslaught of New York paper. Supply has been better, but it's not overwhelming."
In the negotiated market, $650 million of future tax-secured subordinate bonds was priced with yields starting at 0.34% with a 2% coupon maturing in 2016 to 3.93% for the 5% coupon in 2041.
The bonds have an optional call in 2024 at par, and were given Aa1 by Moody's Investors Service and AAA by both Standard & Poor's and Fitch Ratings.
"It got bumped, I know that," the Atlanta trader said. "Generally, there was good reception, it was definitely No. 1. They had the retail period over the last couple of days; what I saw was the 41s were carved out, they had about $10 million in retail.
Maturities in 2020 through 2026 had good reception in retail, and in institutional pricing got the rest of the deal done."
In the competitive market, RBC Capital won the bid for $110 million of tax-
secured taxable subordinate bonds for the New York City Transitional Finance Authority.
All of the bonds are priced at par with yields ranging from a 1.75% coupon
maturing in 2018 to a 3.78% coupon in 2026.
The bonds are callable at par in 2024 with a make whole optional redemption in the plus-25 spread and are rated Aa2 by Moody's analysts.
The New York City Transitional Finance Authority was the fifth-highest issuer for the first quarter, with a market value of 10,470 and a spread return of 0.376%, according to a report Bank of America Merrill Lynch released on Monday.
Yields on bonds maturing from 2020 through 2036 slid as much as one basis point Tuesday, while bonds on the short end and those beyond 2037 were steady, according to the Municipal Market Data triple-A scale.
Yields for two-year maturities held steady at 0.41%, and the 10-year dropped by one basis point to 2.48% and the 30-year fell by two basis points to 3.9%, according to Municipal Market Advisor data.
Market participants said that munis are following Treasuries, which were mostly unchanged on the day, with the 10-year benchmark at 2.70% and the two-year note at 0.41%.
Yields on the 30-year note fell one basis point to 3.55%.
In a report, Morgan Stanley managing director John Dillon wrote on Friday that modest economic improvements may be an indication of this winter's weather impact on economic activity.
"Financial market focus appears to have transitioned back toward the broader recovery, and yields on short-intermediate U.S. Treasury securities have significantly risen since February, with municipals following suit," Dillon wrote.
Issuance is at its heaviest since the week ending March 14 with $5.4 billion expected to come to market this week, according to Ipreo and The Bond Buyer. Potential volume is about $2 billion more than the $3.2 billion issued last week.
"I don't think the increased supply this week hurts, because we've been running on such low issuance," a trader based in Dallas said. "There's enough money out there to absorb supply. I don't think there's been anything in the five billion range this year."
The University of Connecticut's two-part $202 million general obligation issuance was priced late Monday afternoon, after retail sales on Friday and Monday.
"We are delighted to see consistent public demand for Connecticut bonds as worthy investments. By giving individual investors priority during the retail-order period, we provided them a compelling opportunity to generate tax-exempt investment income," Connecticut Treasurer Denise Nappier said in a press release.
Yields on $109 million of the GOs ranged from 0.12% with a 2% coupon in 2015 to 3.67% with a 5% coupon in 2034. Yields on $93 million of the refunding GOs ranged from 0.12% with a 2% coupon in 2016 to 2.91% with a 5% coupon maturing in 2025.
Wells Fargo Securities is the lead underwriter and Moody's rated the deal Aa3, S&P rated it AA, and Fitch gave it a AA-minus. All of the bonds are callable at par in 2024.
The city of San Antonio, Texas, Water System's $104.2 million of junior-lien revenue and refunding bonds were priced to yield from 0.16% with a 2% coupon in 2015 to 3.27% with a 5% coupon in 2029.
There is a call option at par in 2023, and the bonds earned an Aa2 from Moody's and an equivalent AA from Standard & Poor's and Fitch Ratings. JPMorgan Securities is the lead underwriter.
A separate $100 million of San Antonio Water variable-rate junior-lien revenue and refunding bonds was expected to be priced by Jefferies Tuesday.
There were two sizable issuances scheduled for competitive sale on Tuesday, the largest a two-part issuance by the Clark County, Nev., School District of $200.8 million of GOs. Both the $136.3 million and the $64.5 million portions earned a A1 ratings from Moody's and a AA-minus from S&P.
"There's also some activity coming from California and Nevada," a trader based in Missouri said. "It's going to be interesting to see whether people are buying into the economic recovery that we're seeing."
Earlier this week, the Commerce Department reported that consumer credit increased 6.4% in February, more than economists had projected.
Separately, the Conference Board said its Employment Trends Index climbed to 117.52 in March, and is up 5.1% for the year, a signal of strong job growth in coming months.
However, Federal Reserve Bank of Minneapolis president Narayana Kocherlakota said Tuesday that the U.S. labor market remains "far from healthy."
