The majority of the week's largest deals priced Wednesday with Puerto Rico Electric Power Authority lowering yields in repricing and Washington State GOs pricing near the double-A Municipal Market Data scale.
Morgan Stanley priced and repriced $673.1 million of Puerto Rico Electric Power Authority power revenue bonds, rated Baa3 by Moody's Investors Service, BBB by Standard & Poor's, and BBB-minus by Fitch Ratings.
In repricing, the bonds yielded 6.73% with a 7.25% coupon in 2030, 7% priced at par in 2033, 7.02% with a 6.75% coupon in 2036, 7.07% with a 7% coupon in 2040, and 7.12% with a 7% coupon in 2043. The bonds are callable at par in 2023. Yields were lowered as much as three basis points from preliminary pricing.
"It's been a while since a yield that large has come across the screen," a Virginia trader said. "It's turning some heads." This trader added some Puerto Rico credits were weakening as a result of the deal in the secondary market, but that it wasn't dragging down high grade municipals. "There was some concern given the size of the deal and pricing at eye-popping levels that it would do more damage to the market and we're not seeing that."
In another big deal of the day, Washington auctioned $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.
JPMorgan won the bid for the first pricing of $536.4 million of Washington various purpose GOs. Yields ranged from 1.16% with a 5% coupon in 2017 to 4.53% with a 5% coupon in 2038. The bonds are callable at par in 2023.
Spreads to the Municipal Market Data scale ranged from 15 basis points to 35 basis points. The triple-A to double-A MMD spread ranged from 15 basis points to 30 basis points for the same maturities.
JPMorgan won the bid for the second pricing of $275.1 million of Washington motor vehicle fuel tax GOs. Yields ranged from 0.18% with a 2% coupon in 2014 to 4.53% with a 5% coupon in 2038. The bonds are callable at par in 2023.
Spreads to the MMD scale ranged from four basis points to 35 basis points, similar to triple-A to double-A MMD spread that ranged from four basis points to 30 basis points for same maturities.
Details for the third pricing of $55.7 million were not available by press time.
"The longer-end seems more attractive," the Virginia trader said, referring the bonds maturing beyond 10 years in the Washington pricing. "There are some left over bonds in the front end but they are having more success on the long end."
In other deals, Citi held preliminary pricing for $219.6 million of Pennsylvania Turnpike Commission turnpike revenue bonds, rated A1 by Moody's and A-plus by Standard & Poor's and Fitch.
Yields ranged from 1.04% with a 3% coupon in 2016 to 5.18% with a 5% coupon in 2043. The bonds are callable at par in 2023.
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 continued to post modest gains Wednesday afternoon. The benchmark 10-year yield slid two basis points to 2.62% and the 30-year yield fell three basis points to 3.70%. The two-year yield fell one basis point to 0.31%.