Goldman Sachs won the largest deal of the week: $554.5 million of Alabama Public School and College Authority capital improvement refunding bonds.
Yields ranged from 1.26% with a 5% coupon in 2019 to 2.80% with a 5% coupon in 2027. The bonds are callable at par in 2024.
"Yields were just off the scale in a weaker market," a trader based in Chicago said. Referring to the 2.80% yield, he said, "That's a good number. These are good results for the borrower for sure."
The deal is rated Aa1 by Moody's Investors Service, AA by Standard & Poor's and AA-plus by Fitch Ratings.
The $450 million commonwealth of Massachusetts general obligation bonds sold on Tuesday to Jefferies, bringing narrow spreads to the market.
"The Massachusetts deal's spreads are too tight," a New York trader complained.
Yields ranged from 2.05% with a 5% coupon in 2022 to 3.27% with a 5% coupon in 2031.
"It has pretty tight spreads," the Chicago trader said. "It's one of those headline-strong names. People need product in Massachusetts and so they will pay a good number for it."
The bonds are callable at par in 2022. The deal is rated Aa1 by Moody's, and AA-plus by both S&P and Fitch.
"Broker-dealers are starved for quality product due to low new issue volume and big name borrowers are taking advantage, bringing competitive deals to market," the Chicago trader said. "Broker-dealers have to put their best foot forward to get access to the bonds."
The bulk of this week's new issue debt is expected to enter the municipal market on Tuesday, as reinvestment season takes flight.
"The calendar is light this week," the first New York trader said. "There's nothing really out there."
July 1 means maturing debt and coupon payments.
"Folks have to remember that you can't always count on reinvestment demand coming back into the market," a trader in Pennsylvania said. "If you look at last year, despite June and July being strong in terms of maturity and coupon payments, the rising rates had a lot of investors sitting on the sidelines. Right now, we're seeing reinvestment demand into munis, but it shouldn't be viewed as a given."
New issuance was higher this June at $34 billion, compared to last year's $26 billion, the first time this year that a month surpassed the issuance for the same period last year.
"Right now is an ideal time for issuers to come into the market, simply because there is some stability if not strength on the rate front," John Dillion, managing director at Morgan Stanley Wealth Management said. "There is a large amount of redemptions in the market as we head into the summer."
RBC Capital Markets was scheduled to price $322 million of Lancaster Port Authority gas supply revenue refunding bonds on Tuesday, the largest deal in the negotiated market. The deal is rated Aa3 by Moody's Investors Service.
J.P. Morgan Securities priced $372.9 million of Dallas Independent School District unlimited tax refunding bonds. Yields ranged from 0.33% with a 4% coupon in 2016 to 1.00% with a 5% coupon in 2034.
"One of the interesting deals is the charter school deal," the first New York trader said. "That's going to get some interesting spread in the plus-29 to plus-40 range."
The bonds are callable at par in 2024 except the 2034 maturity, which is callable at par in 2015. The deal is rated Aa1 by Moody's and AA-minus by S&P.
Wells Fargo Securities priced $200 million of Los Angeles Department of Water and Power revenue bonds. Yields ranged from 0.53% with a 4% coupon in 2017 to 3% with a 5% coupon in 2029. The bonds are callable at par in 2024.
The deal is rated Aa3 by Moody's, and AA-minus by both S&P and Fitch.
Raymond James is expected to bring $105 million of Houston Higher Education Finance Corporate revenue and refunding bonds. The deal is rated BBB by S&P.
Munis were unchanged from Monday's market close on Tuesday, according to the Municipal Market Data's triple-A scale.
Treasuries were mostly weakened Tuesday afternoon, with the 30-year yield and the 10-year benchmark climbing four basis points each to 3.39% and 2.56%, respectively. The two-year note was unchanged at 0.47% from Monday's market close.
