New York City offered $500 million of general obligation bonds for retail investors Monday with traders saying the deal was accurately priced and should lure in plenty of investors eying high-grade double-A GOs.
"It looks attractive to me," a New Jersey trader said. "I've seen bonds as high as 35 basis points over and these are coming out at 40 to 42 basis points over," he said, referring to the yield on the NYC GOs compared to Friday's triple-A Municipal Market Data scale. "It's a reasonable price for retail and there are some gives in spread because they are trying to sell about $500 million. So it's priced right. And the overall market tone is going to be the determinant in terms of how well it does today."
Indeed, the overall tone was firmer Monday morning, extending gains into a ninth consecutive trading session. "It's somewhat stronger and we are seeing a little more interest in terms of overall strength in the market," this trader said
Much of the firmer tone is due to a lack of supply, putting pressure on yields. "There is a fair amount of demand for high-grade specialty state paper from investment advisors and mutual funds," the trader said.
Siebert Brandford Shank & Co. priced the nearly $500 million of the NYC GOs for retail, rated Aa2 by Moody's Investors Service and AA by Standard & Poor's and Fitch Ratings. A second retail order period will be held Tuesday followed by institutional pricing Wednesday. The city on Wednesday will also issue a separate taxable competitive deal totaling $125 million.
In the deal Monday, yields on the first series of $300 million ranged from 0.80% with a 3% coupon in 2016 to 4.26% with a 5% coupon in 2033 and are callable at par in 2023. Bonds maturing in 2015 were offered via sealed bid. Portion of bonds maturing between 2026 and 2031 were not offered for retail. Bonds with 5% coupons maturing between 2022 and 2033 yielded 19 basis points to 22 basis points above Friday's double-A Municipal Market Data scale.
Yields on the second series of $179 million ranged from 0.80% with a 4% and 5% coupon in a split 2016 maturity to 2.26% with a 4% and 5% coupon in a split 2020 maturity. Bonds with 5% coupons yielded six basis points to 16 basis points above Friday's double-A MMD scale.
Yields on the third series of $20.2 million ranged from 0.60% with a 5% coupon in 2016 to 2.11% with a 5% coupon in 2020. In a sign of demand, most bonds on this series were priced richer than Friday's double-A MMD scale, yielding between four and 14 basis points through the scale on bonds maturing between 2016 and 2019. Bonds maturing in 2020 yielded one basis point above the scale.
The New York City deal is one of the largest deals in a week that should see relatively light issuance. The market can expect $4.02 billion in new deals, down from last week's revised $4.80 billion, according to Ipreo and The Bond Buyer. In negotiated deals, $3.41 billion is expected along with $608.1 million in competitive sales.
On Friday, yields on the triple-A Municipal Market Data scale ended as much as three basis points lower. The 10-year yield fell one basis point to 2.60% and the 30-year yield dropped three basis points to 4.20%. The two-year yield fell two basis points to 0.36%.
Yields on the Municipal Market Advisors scale also ended as much as three basis points lower. The 10-year yield fell two basis points to 2.75%. The two-year and 30-year yields were flat at 0.54% and 4.31%, respectively.
Treasuries continued to firm Monday afternoon after both Atlanta Fed President Dennis Lockhart and New York Fed President William Dudley said the economy hasn't shown enough improvement for the Fed to begin tapering its $85 billion-a-month bond purchasing program. The 10-year and 30-year yields each slid three basis points to 2.71% and 3.74%, respectively. The two-year yield fell one basis point to 0.33%.
