Wednesday promises to be another busy day in the primary, with the largest deal of the week, the $1 billion San Joaquin Hills Transportation Corridor Agency, scheduled for pricing.
The bonds are interesting to investors because they are lower rated than most California credits, meaning that investors may have an opportunity to pick up a bit of yield.
On Tuesday the municipal market's sell-off boosted the success of lower-rated deals, and the question on most traders' minds as the market continued to weaken on Wednesday morning is will the rising yields will help the San Joaquin deal, or will the deal team take advantage of the yield starved environment and price the bonds aggressively? Here's your playbook for Wednesday:
Primary
- The $1 billion bonds the San Joaquin Hills Transportation Corridor Agency is selling will hold most buyers' attention on Wednesday, traders said. The bonds consist of senior lien toll road refunding revenue bonds and junior lien toll road refunding revenue bonds. The senior lien bonds are rated BBB-minus by Standard & Poor's and Fitch Ratings, and are current interest bonds, convertible capital appreciation bonds, and capital appreciation bonds. The junior liens are rated BB-plus by S&P and Fitch and are current interest bonds. Goldman and Barclays capital are joint bookrunners on the deal, with Goldman running the seniors and Barclays the juniors.
- Massachusetts is auctioning a two-part $700 million general obligation bond deal in the competitive market. The bonds are rated Aa1 by Moody's Investors Service, and AA-plus by S&P and Fitch.
- The $500 million Metropolitan Transportation Authority transportation revenue bonds are expected to enter a retail order period. They are rated A2 by Moody's, AA-minus by S&P and A by Fitch. RBC Capital Markets is the managing underwriter.
- The Virginia College Building Authority is auctioning $289.2 million bonds in a deal composed of $103 million education facilities revenue bonds and $186.2 million education facilities revenue refunding bonds. The bonds in both parts of the deal are rated Aa1 by Moody's, AA by S&P and AA-plus by Fitch.
- $258.7 million Seattle municipal light and power improvement refunding revenue bonds will be auctioned. The bonds earned an Aa2 rating from Moody's and a AA from S&P.
- The Los Angeles County Redevelopment Refunding Authority is selling $159 million tax allocation revenue refunding bonds. The bonds are tax-exempt, rated A-plus by S&P and have Stifel, Nicolaus & Company as their managing underwriter.
- Bank of America Merrill Lynch is expected to price $150 million revenue refunding bonds on Tuesday for the Seattle Cancer Care Alliance.
- Raymond James & Associates is scheduled to price $112.76 million hotel tax revenue refunding bonds for the Greater Richmond Convention Center. The bonds have serial maturities from 2016 to 2032 and are rated A2 by Moody's, A by S&P and A-plus by Fitch.
Scales
Municipal bonds continue to sell off Wednesday morning with bonds maturing in seven to 10 years yields rising as much as one basis point, according to Municipal Market Data's triple-A scale. Yields on bonds maturing in 11 to 15 years increased up to two basis points, and grew as much as one basis point for 16- to 19-year maturities.
Yields for bonds maturing in one to four years are "under review," according to MMD.
The rest of the curve held steady.
Treasuries also experienced a yield increase on Wednesday morning with the 30-year rising by one basis point to 3.01% from Tuesday's market close. The 10-year yield also grew by one basis point to 2.24%, and the two-year note by one basis point to 0.39%.
