The $200 million San Antonio, Texas, electric and gas systems junior lien revenue bonds priced by Barclays Capital on Tuesday will be wolfed up because they appeal to investors who like Texas paper and investors ravenous for power bonds, market participants said.
The bonds' yields ranged from 2.71% with a 5% coupon in 2026 to 3.62% with a 5% coupon in 2044.
"Texas has been issuing a lot, but there is still demand for that paper," a trader on the West Coast said.
There are sinking funds for the 2039 and 2044 term bonds. The issue earned a Aa2 rating from Moody's Investors Service, a AA-minus from Standard & Poor's and a AA-plus from Fitch Ratings. The bonds are callable at par in 2024.
Texas has been the top state issuer this year through May 31, according to data provided by The Bond Buyer and Ipreo. The state had issued $14.52 billion by the end of May, 4.3% more than it issued during the same period in 2013.
The trader on the West Coast said he does not believe the market is saturated with Texas paper at this time.
Dawn Mangerson, managing director and senior portfolio manager at McDonnell Investment Management, said in an interview that power is an area where McDonnell would like to see more supply.
"I think there is still strong demand, especially for the power sector and water and sewer, essential service revenue type bonds," she said.
JP Morgan Securities will bring $213.2 million of New York State Environmental Facilities Corporation revolving refunds revenue bonds Tuesday. The deal received triple-A ratings from Moody's, S&P and Fitch.
Citigroup Global Markets will bring $130 million of San Bernardino tax and revenue anticipation notes. The deal received an MIG 1 from Moody's and an SP-1-plus from S&P.
Citigroup Global Markets will also issue $104 million of Clark County, Nev., airport system junior subordinate lien revenue notes. The deal is rated A2 by Moody's.
Bank of America will bring $110.9 million of Arizona School Facilities Board certificates of participation. The deal received an A1 from Moody's.
There are no deals over $100 million scheduled to enter the competitive market Tuesday.
Munis weakened Tuesday morning, with yields maturing in five to 11 years inching up as much as one basis point, according to the Municipal Market Data's triple-A scale. Yields on bonds maturing in 12 to 29 years jumped as much as two basis points, while those on the short-end of the curve were under review.
Treasuries weakened Tuesday morning, with 30-year yields and the 10-year benchmark each climbing three basis points to 3.40% and 2.57%, respectively. The two-year note was unchanged at 0.40% from Monday's market close.
