Several sizeable new bond issues Tuesday may not get the attention issuers hoped for as Puerto Rico's highly anticipated $3.5 billion bond sale grips the market.
The commonwealth of Puerto Rico upsized its deal from $3 billion to $3.5 billion Tuesday morning as senior managers Barclays Capital, Morgan Stanley and RBC Capital Markets sold bonds at a yield of 8.73%.
"The deals today might be a little bit overshadowed, there's definitely some truth to that," a sales and trading manager in New York said in an interview. "We've had a lot of retail investors ask about Puerto Rico instead of Connecticut or New York's deal this week, even though Puerto Rico is not marketed to them."
Retail investors likely won't see much of Puerto Rico's bond issuance, even after the commonwealth lowered minimum denominations to $100,000. Many brokers and advisors at the largest wealth management firms
"But I think if the Puerto Rico deal was available to retail it would get a lot fewer orders than expected," the trading manager said. "Customers just want to hear about it, not pull the trigger. There's a lot of risk on it."
Also coming to market Tuesday are $135.4 million of Ohio Water Development revenue refunding bonds rated Baa3 by Moody's Investors Service and BBB-minus by Standard & Poor's. Goldman, Sachs & Co. is the lead underwriter.
The sale is set to hit the market the same day that Gov. John Kasich will announce Ohio's budget legislation. The budget is predicted to highlight cuts to income-tax that may cost the state up to $600 million a year, according to Municipal Market Data.
Also in the negotiated market, Clark County, Nev., issued $100 million of highway revenue bonds backed by indexed fuel tax and subordinate motor vehicle tax revenues. Yields ranged from 0.28% with a 4% coupon maturing in 2015 and 4.30% with a 5% coupon in 2034. The bonds are callable at par in 2024.
Market participants said that secondary trading appeared quiet.
"Investors are literally waiting to see what's over the hump, to see if there is more yield coming out there," the New York-based manager said. "Everyone is holding out for the next bigger, better yield."
Municipal bond yields measured by Municipal Market Data's AAA scale are steady to one basis point higher for bonds maturing between 2019 through 2038. Bonds maturing on the short end of the curve as well as those maturing beyond 2039 were unchanged.
Treasury yields firmed Tuesday morning, with the 30-year sliding one basis point to 3.72% .The benchmark 10-year as well as the two-year notes were unchanged at 2.78% and 0.38%, respectfully.
