Market participants are waiting for the $450 million Metropolitan Washington Airport Authority bonds expected to price Wednesday.
"Out of the big negotiated deals coming to market we're paying attention to Washington Airports," a trader in New York said.
JP Morgan will price the revenue bonds. The deal is rated Baa1 by Moody's Investors Service and BBB-plus by Standard & Poor's. "The Washington Airport deal is one of the bigger deals this week," a trader in Dallas noted.
A trader in New Jersey said in an interview on Tuesday that he was interested in the bonds, but had to see where they would be priced.
In a report released on May 9, Janney Capital Markets said The airport and airline sectors have stablized. Airports experienced fiscal troubles in the years following the September 11 terrorist attacks and the economic crisis.
"From a peak of 835 million enplanements at US airports in 2007, passenger traffic fell by 8% in the next two years," Janney wrote in the report. But, the situation has been improving and if the 515 airports with Federal Aviation Administration towers are considered, airport traffic has risen to just below its 2007 peak, the report says.
"The most recent Federal Aviation Administration Forecast projects that enplanements at the top 29 airports will grow at a 2% annual rate over the next five years and at a 1.9% annual rate through 2040," Janney wrote in the report.
A Barclays Capital report released on May 5 noted that the Dallas/Fort-Worth International Airport bonds maturing in 2042 were the ninth most actively traded tax-exempt CUSIPs this April, with 34 trades and a 107 basis point spread.
"Municipal bond investors should consider owning airport bonds as a portion (5% to 10%) of a diversified municipal bond portfolio," Janney wrote in its report.
Janney does warn that individual airline finances are less certain. "High exposure to single airlines or large amounts of connecting traffic can interject a degree of uncertainty into airport finances," the report said.
Other than the Washington airport deal, Bank of America Merrill Lynch will bring $153.4 million of Jacksonville Electric Authority revenue bonds to the market Wednesday. The bonds received a Aa2 rating from Moody's, a AA-minus from S&P and a AA from Fitch Ratings.
Municipal yields fell across the curve on Wednesday with yields for bonds maturing in four to eight years dropping by up to two basis points, nine- to 12-year maturities fell between one and three basis points, 13- to 18-year maturities declined from two to four basis points, 19- to 22-year maturities dropped from three to five basis points, and bonds maturing in 23 to 30 years fell between four and six basis points.
Treasuries strengthened Wednesday morning, with 30-year yields falling six basis points to 3.39% and the 10-year benchmark slipping four basis points to 2.56%. The two-year notes slid one basis point to 0.38%.
