NEW YORK – Many of the week’s largest deals in the municipal market are being priced Wednesday and traders said reception is moderate.
“We are doing OK,” a Los Angeles trader said. “We were hoping they would do better but there is certainly a lot of news out here,” referring to Stockton declaring bankruptcy Tuesday evening. “There are a couple of deals out there that are trying to find footing. If you price attractively enough it does well. We are seeing one deal that has been bumped 10 basis points because it came in a little too cheap.”
The trader said the announcement that Stockton is declaring bankruptcy is not affecting the secondary market. “The Stockton situation was so anticipated that there is no surprise in the market. There are a lot of Stockton bonds out there for bid and that’s certainly been the case over the last few days. But the market is treating them selectively. There are better bids on school bonds. There are just a lot of them out there.”
He added that “If you’re surprised it happened I don’t know where you’ve been for the last three months.”
Munis were steady Wednesday afternoon, according to the Municipal Market Data scale.
On Tuesday, the 10-year yield ended flat at 1.86% for the eighth consecutive trading session while the two-year ended steady at 0.32% for the 18th straight session. The 30-year yield finished flat at 3.16% for the third session.
Treasuries were steady to firmer Wednesday. The two-year yield and the 30-year yield each fell one basis point to 0.31% and 2.70%. The benchmark 10-year was steady at 1.64%.
In the primary market, Loop Capital Markets priced the biggest deal of the week – $1.26 billion of City of Los Angeles tax and revenue anticipation notes. Prices were not available by press time.
Bank of America Merrill Lynch priced for retail $1 billion of New York’s Metropolitan Transportation Authority bonds, rated A2 by Moody’s Investors Service and A by Standard & Poor’s and Fitch Ratings. Institutional pricing is expected Thursday.
Yields ranged from 1.03% with 3% and 4% coupons in a split 2015 maturity to 4.07% with a 4% coupon in 2032. Bonds maturing between 2024 and 2029 were not offered for retail. The bonds are callable at par in 2022.
Bank of America Merrill Lynch price $524 million of Providence Health and Services bonds, rated Aa2 by Moody’s and AA by Standard & Poor’s and Fitch. Prices were not available by press time.
Morgan Stanley priced $502.9 million of Long Island Power Authority electric system general revenue bonds, rated A3 by Moody’s, A-minus by Standard & Poor’s, and A by Fitch.
Bonds on the first series of $250 million yielded 3.97% with a 5% coupon in 2037 and 4.03% with a 5% coupon in 2042. The bonds are callable at par in 2022.
Yields on the second series of $252.9 million ranged from 0.82% with a 3% coupon in 2014 to 3.62% with a 5% coupon in 2029. Credits maturing in 2013 were not formally re-offered. The bonds are callable at par in 2022.
In the competitive market, JPMorgan won the bid for $127.4 million of Rhode Island Health and Educational Building Corporation revenue bonds, rated Aa1 by Moody’s and AA-plus by Standard & Poor’s. The bonds had 5% coupon in 2021 and 2022. Prices were not available.