Puerto Rico Electric Power Authority grabbed the attention of the municipal bond market Wednesday with yields over 7% attracting buyers.
Yields released during preliminary pricing by Morgan Stanley for $674.9 million were in line with levels mentioned in the pre-marketing wire Tuesday. The bonds are rated Baa3 by Moody’s Investors Service, BBB by Standard & Poor’s, and BBB-minus by Fitch Ratings.
In preliminary pricing, the bonds yielded 6.75% with a 7.25% coupon in 2030, 7% priced at par in 2033, 7.05% with a 6.75% coupon in 2036, 7.10% with a 7% coupon in 2040, and 7.15% with a 7% coupon in 2043. The bonds are callable at par in 2023.
“New issues are dominating again with PREPA on the forefront,” a New York trader said. Outside Puerto Rico, this trader said more new issues needed to price before saying definitely where the secondary was trading. “It’s hard to say until new issues shake out since there is not much secondary right now.”
In other deals Wednesday, Barclays is expected to price for institutions $639.9 million of Regents of the University of California medical center pooled revenue bonds, rated Aa2 by Moody’s, AA-minus by Standard & Poor’s, and AA by Fitch.
In retail pricing Tuesday, yields ranged from 0.53% with a 2% coupon in 2015 to 5% priced at par in 2043. Bonds maturing in 2014 were offered via sealed bid. Portions of bonds maturing between 2027 and 2048 were not offered for retail. The bonds are callable at par in 2023.
In the competitive market, Washington is expected to auction $867.2 million of general obligation bonds in three pricings, rated Aa1 by Moody’s and AA-plus by Standard & Poor’s. The pricing consists of $536.4 million, $275.1 million, and $55.7 million.
Tuesday, yields on the Municipal Market Data scale ended as much as three basis points higher after rising three basis points Monday. The 10-year yield rose one basis point to 2.73% and the 30-year yield increased three basis points to 4.28%. The two-year finished flat at 0.43% for the 15th consecutive session.
Yields on the Municipal Market Advisors scale ranged between three basis points lower and one basis point higher. The 10-year yield fell three basis points to 2.90% and 30-year yield rose one basis point 4.34%. The two-year was unchanged at 0.55% for the fourth session.
Treasuries were stronger Wednesday morning after two days of losses. The benchmark 10-year and 30-year yields slid two basis points each to 2.62% and 3.71%, respectively. The two-year yield slipped one basis point to 0.31%.