The $784 million Chicago Midway Airport second lien revenue and revenue refunding bonds' high yields sparked investors' interest Wednesday.
Barclays Capital priced the two-part deal with yields for the $480.57 million alternative minimum tax portion ranging from 2.58% with a 5% coupon in 2021 to 4.44% with a 5% coupon in 2041. Yields on $303.5 million of non-alternative minimum tax bonds ranged from 1.55% with a 5% coupon in 2019 to 4.30% with a 4.25% coupon in 2037.
"The deal is liquid and large, and everyone is going to buy it because it shows more yield than other stuff," a trader in Chicago said.
The deal is callable at par in 2024 and is rated A3 by Moody's Investors Service and A-minus by both Standard & Poor's and Fitch Ratings.
"Barclays knows what they are doing, it looks like the deal was priced decently," a trader in New York said.
A trader in New Jersey said the airport sector is one area investors can look for a little more yield, because airport deals can get done a little cheaper.
Market participants do not believe that the retail order periods for two of the largest deals this week, Massachusetts Water Pollution Abatement Trust and the Los Angeles Department of Water and Power, impacted the Chicago airport's sale because the deals were marketed toward different types of investors.
"The Massachusetts Water deal is AAA rated, so basically looking for buyers that want very high quality," a second trader in New York said. "A lot of those buyers might need Massachusetts paper. The airport deal will tend to attract buyers seeking a little more yield and probably add some liquidity."
The first trader in New York said the Midway bonds and the utility deals will not affect one another because the airport bonds were likely marketed toward institutional investors.
"The deal will get interest from retail, but lots more interest from institutional," he said. "AMT is going to knock out a whole set of retail with that alone, so what [underwriters] do is wrap it with a 5% coupon. That's what the types of institutions that are buying this type of paper are demanding right now."
D.A. Davidson will price $150 million of Edmonds School District #15, Wash., GOs Wednesday. The deal is rated Aa1 by Moody's and AA-plus by Standard & Poor's.
Stifel, Nicolaus will bring $114.4 million of School Board Volusia County, Fla., refunding certificates of participation to market Wednesday. The deal received an Aa3 from Moody's and an A-plus from Fitch.
Munis mostly strengthened Wednesday afternoon, with yields on the intermediate part of the curve falling as much as four basis points. Yields on bonds maturing beyond 2032 dropped as much as five basis points, according to the Municipal Market Monitor triple A-scale. Short-term munis are steady.
Treasuries were mixed Wednesday morning, with 30-year yields and the 10-year benchmark falling seven basis points each to 3.30% and 2.45%, respectively. The two-year note inched up one basis point to 0.37%.
