The municipal bond market continued to trudge along at a slow pace Tuesday as a few of the week's larger deals priced. Massachusetts entered its second day of a two-week long retail order period for its MassDirect issuance.
The commonwealth of Massachusetts' MassDirect program went into effect Monday as the first series of bonds hit the market. The program, modeled after the U.S. Treasury's TreasuryDirect program, is the first of its kind to be offered at a state level.
"It's slated to run every day this week and will reprice each day," Ed Holleran, a director at TMC Bonds, said in an interview. "The deal is somewhat revolutionary in having it reprice. About 10% of the deal was received in the first day and it will be bigger today."
The program calls for daily repricing and allotment of bonds for three maturities during the first week of the offering. About $30 million of bonds was offered to retail Monday, and $2.98 million was repriced by the end of the day. The bonds received an Aa1 rating by Moody's Investors Service and AA-plus scores from Standard & Poor's and Fitch Ratings.
The series is the first of many as the commonwealth anticipates selling $250 million over the next six months through the program. GO bonds will only be offered to retail investors during the last two weeks of each month.
"There has been decent support on the first day even though some firms were looking to see how it played out first and others looked for approval from their agency to participate," said Holleran.
By offering the MassDirect notes through TMC will help the state broaden the range of firms that have access to the deal, Holleran said.
As retail orders are placed all week, investors are expected to become comfortable enough with the deal that they participate more frequently as the MassDirect deal continues for the next several months, Holleran said.
"Buyers will get more comfortable with the idea to invest with more transparency week after week. The deal will help build more liquidity, because there will be more people involved," said Holleran.
In the negotiated market, Clark County, Nev., priced $318 million of McCarran International Airport revenue refunding bonds. The deal is divided into two parts, with $222 million that is not subject to the alternative minimum tax.
The $222 million segment has yields ranging from 3.26% with a 5% coupon in 2025 to 4.43% with a 4.25% coupon in 2036. The other $97.1 million of the issuance is subject to the AMT and has yields ranging from 0.14% with a 4% in 2014 to 3.34% with a 5% coupon in 2024.
The non-AMT part of the issuance has an optional call at par in 2024 and the AMT portion has no call option. Bank of America Merrill Lynch was the underwriter and the issuance was rated A1 by Moody's Investors Service and A-plus by Standard & Poor's.
In the competitive market, Bank of America Merrill Lynch won the, $117 million bid for the first part of Howard County, Md.'s public improvement GO issuance. The tax-exempt refunding bonds have yields ranging from 0.16% with a 5% coupon in 2015 to 3.59% with a 4% coupon in 2034.
