Morgan Stanley won the bid for $113.3 million of Delaware Transportation Authority's Delaware Transportation System senior revenue bonds on Tuesday, the largest competitive issuance scheduled for the week.
Yields ranged from 0.15% with a 5% coupon maturing in 2015 to 2.55% with a 3.25% coupon in 2025.
"The buyside would definitely like to see rates go out, but with the amount of money around and the lack of supply out there I don't see rates rising anytime soon," a trader in Dallas said.
The bonds are callable at par in 2024 and are rated Aa2 by Moody's Investors Service and AA-plus by Standard & Poor's.
While the trader in Dallas believes buyers would like to see some higher yield, he has not noticed demand for new issuance waning.
"Right now our market is dominated by the lack of supply and the amount of money that's out there right now," he said. "I think the market will stay in a fairly tight trading range."
He has not seen any pushback from the buyside related to bonds coming to market recently.
"We are looking at the Delaware transportation deal," a trader in Chicago said.
Dorian Jamison, municipal analyst at Wells Fargo Advisors, wrote in a report released Friday that the spread between highly rated transportation bonds and the Bloomberg municipal bond benchmark is more than one standard deviation higher than its 12-month average, indicating that it is cheap relative to the triple-A municipal benchmark.
On April 24, 2014, the spread between the Bloomberg AA-plus rated 10-year transportation index and the municipal benchmark was 56 basis points, a 32-month high, Jamison wrote in the report.
"Value conscious investors may want to consider increasing positions in single-A rated or better transportation bonds," he wrote. "Transportation bonds, as tracked by the S&P transportation index, have returned 5.6 percent year-to-date and 0.7 percent over the past 12-months, outperforming the broader municipal market."
Municipal bond yields strengthened on Tuesday decreasing as much as two basis points for two- to six-year maturities and for 12-to 30-year maturities. Maturities of one year and seven to 11 years held steady.
Barclays Capital will bring $260 million of tax allocation refunding bonds for the successor agency to the Inland Valley Development Agency Tuesday. The deal consists of a non-alternative minimum tax series and a federally taxable series. The bonds are rated A-minus by S&P.
Citigroup Global Markets brought to market Tuesday $176.1 million of lease revenue bonds for the San Mateo County Joint Powers Financing Authority in California. Yields ranged from 0.68% with a 3% coupon in 2017 to 4.12% with a 4% coupon in 2037. The bonds mature serially from 2017 to 2034 and have term bonds in 2035 and 2037. The bonds are callable at par in 2024 and are rated AA-plus by S&P.
Barclays priced $135.3 million of receipt revenue and refunding bonds for the University of Miami, Ohio. Yields ranged from 0.20% with a 3% coupon in 2015 to 4% at par in 2039. The bonds are callable at par in 2024, except for bonds maturing in 2036, which are callable at par in 2020. There are terms in 2036 and 2039.The deal is rated Aa3 by Moody's and AA by Fitch Ratings.
Treasuries were steady Tuesday afternoon, with the 30-year and the 10-year benchmark remaining at 3.40% and 2.61%, respectively, from Monday's market close. The two-year notes weakened, rising one basis point to 0.44%.
