Yields on the bonds from New York City's $850 million general obligation issuance were lifted two basis points during the second day of retail order period.
Yields on the $744.95 million series ranged from 0.80% with a 4% coupon in 2017 to 3.85% with a 3.75% coupon in 2034. Yields for the $105.1 million series now range from 0.80% with a 3% coupon in 2017 to 2.46% with a 4% coupon in 2022.
"We try to track the market movement on the MMD on second day so that we are not falling behind or getting ahead of investors," Alan Anders, Deputy Director for Finance at the Mayor's Office of Management and Budget, said in an interview.
Municipal bond yields rose across the curve on Tuesday, according to Municipal Market Data's triple-A scale. Yields for bonds maturing in three to four years increased by one to three basis points, and grew by two to four basis points for bonds maturing in six to 30 years.
Morgan Stanley is the lead underwriter, and both series of the deal were rated Aa2 by Moody's Investors Service and AA from Standard & Poor's and Fitch Ratings. The first series has sealed bids on its 2015 and 2016 maturities, and bonds maturing from 2028 to 2033 were not offered to retail. The bonds have a call option at par in 2024.
The second part of the deal has sealed bids on its bonds with 2014 to 2017 maturities, and no call option.
Investors have expressed some concern about New York City bonds after a contract was reached with the United Federation of Teachers, which will provide an 18% wage increase over the course of nine years, in return for more than $1 billion in healthcare cost savings over the next four years.
In the $850 million GO deal's preliminary official statement the city elaborated on its plans for the $1 billion in healthcare cost savings.
"The Financial Plan funding for the net cost of all of the elements of the Tentative Agreement as applied to the entire municipal workforce (including the UFT as described above) is $1.96 billion, $43 million, $1.92 billion, $1.92 billion and $3.3 billion in fiscal years 2014 through 2018, respectively, for a total net cost of $9.16 billion," the statement said. "Such net amounts reflect the offsets from the release of $1 billion of reserves from the health stabilization fund in fiscal year 2015 and health insurance savings of $400 million, $700 million, $1.0 billion and $1.3 billion in fiscal years 2015 through 2018, respectively, which have been approved by the Municipal Labor Committee."
The statement said the city can enforce such health insurance savings through a binding arbitration process.
Barclays Capital wrote in a June 6 report that new information about the deal with the UFT downsizes the risk surrounding how the city would achieve its planned healthcare savings.
"Specifically, the agreement is structured such that savings above the targeted amount are shared with the unions, aligning the incentives of the City and the unions to reach the targets," Barclays wrote in the report. "100% of the first $365mn of additional savings goes to the union, and further savings are split evenly between the City and the unions."
Spreads between the New York 10-year and the benchmark AAA 10-year GO have tightened by 10 basis points from June 10, 2013 to June 9 this year, according to Municipal Market Data. The yield for the New York GOs was 2.36% on June 9, compared to 2.29% for the AAA 10-year.
Morgan Stanley will price $235.3 million of Indiana Finance Authority first lien wastewater utility revenue bonds on Tuesday. The deal is rated Aa by Moody's Investors Service, AA by Standard and Poor's and A by Fitch Ratings.
Wells Fargo Securities priced a two-part $219.9 million Nebraska Public Power District deal. Yields for $195.4 million of revenue bonds ranged from 0.18% with a 2% coupon in 2015 to 4.16% with a 4% coupon in 2044. There are two term bonds in 2044 and the bonds are callable at par in 2022.
The $24.5 million series is priced at par to yield 0.48% in 2016 without a call option. The deal is rated A1 by Moody's and A by Standard & Poor's and A-plus by Fitch.
Citigroup Global Markets planned a retail order period on Tuesday for $200.8 million of Fairfax County, Va., facilities revenue bonds. The deal is expected to be priced for institutions on Wednesday and is rated Aa1 by Moody's and AA-plus by S&P.
Rice Financial Products continues its retail order period for $200 million of Connecticut GOs. The deal is expected to be priced for institutions on Wednesday and is rated Aa3 by Moody's, and AA by S&P, Fitch and Kroll Bond Rating Agency.
Citigroup will price $125 million of Board of Governors of the University of North Dakota revenue bonds. The bonds mature serially from 2015 to 2034 with a term bond in 2039. The deal is rated Aa3 by Moody's and A by S&P.
Goldman Sachs will hold a retail order period for $122.1 million of Kentucky Turnpike Authority economic development road revenue refunding bonds. The deal is expected to be priced for institutions on Wednesday and is rated Aa2 by Moody's, AA-plus by S&P and A-plus by Fitch.
Raymond James & Associates will bring $109.7 million of the Metropolitan Government of Nashville and Davidson City, Tenn., electric revenue bonds. The bonds mature serially from 2015 to 2039 and are rated AA-plus by both S&P and Fitch.
JP Morgan Securities won the bid for $116.5 million of Lynchburg, Va., GOs on Tuesday, the largest competitive deal of the week. The deal is rated Aa2 by Moody's and AA-plus by both S&P and Fitch.
Treasuries weakened Tuesday afternoon, with the 10-year benchmark and the 30-year yield jumping three basis points each, to 2.64% and 3.47%, respectively. The two-year note inched up one basis point to 0.44%.
