The municipal bond market is prepared to see more supply on Wednesday led by the pricing of the Salt River Project's $887 million of revenue bonds.
Secondary Market
Treasury prices were higher on Wednesday as the yield on the two-year Treasury note declined to 0.56% from 0.60% on Tuesday, while the 10-year yield dropped to 2.20% from 2.27% and the 30-year yield decreased to 2.98% from 3.02%.
The yield on the 10-year benchmark muni general obligation on Tuesday rose two basis points to 2.24% from 2.22% on Monday, while the yield on the 30-year GO was up three basis points to 3.21% from 3.18%, according to the final read of Municipal Market Data's triple-A scale.
The 10-year muni to Treasury ratio was calculated on Tuesday at 99.2% versus 97.8% on Monday, while the 30-year muni to Treasury ratio stood at 106.5% compared to 104.8%, according to MMD.
Primary Market
Goldman Sachs is set to price the Salt River Project Agricultural Improvement Power District, Ariz.'s $886.54 million of Series 2015A Salt River Project electric system revenue bonds for institutions on Wednesday after a one-day retail order period.
The bonds were priced on Tuesday for retail to yield 0.48% with 4% and 5% coupons in a split 2016 maturity and 0.85% with a 5% coupon in 2017; from 1.62% with a 5% coupon in 2020 to 2.06% with a 5% coupon in 2022; from 2.65% with a 5% coupon in 2026 to 2.87% with a 5% coupon in 2028; as 4s to yield 3.50% in 2033; as 3 1/2s to yield 3.75% and as 5s to yield 3.28% in a split 2035 maturity. There were no retail orders taken in 2032, 2034, 2036 or 2045; the 2016 maturity was offered as a sealed bid. The issue is rated Aa1 by Moody's Investors Service and AA by Standard & Poor's.
The deal is expected to produce about $300 million of new money for SRP's capital projects, with the rest of the bonds refunding outstanding debt for savings.
SRP does not have any other bond issues planned after this one, according to SRP Corporate Treasurer Steve Hulet.
"SRP's six-year financial plan includes capital expenditures to meet future electric system growth and replacement of aging infrastructure," Hulet said. "We would anticipate funding a portion of that capital plan with bond issues. However, SRP has no specific plans for a bond sale following the currently proposed sale."
When SRP does come to market, it usually brings large amounts of debt. The agency was considering issuing as much as $1.5 billion in the current sale before it was downsized.
Meanwhile on Wednesday, the Las Vegas Valley Water District, Nev., is set to come to market with $388.12 million of Series 2015 A, B and C limited tax GO refunding bonds. JPMorgan is slated to price the bonds. The issue is rated Aa1 by Moody's and AA-plus by S&P.
Also, Stifel Nicolaus is expected to price the Chippewa Valley Schools, Mich.'s $296.3 million of refunding bonds consisting of $99.7 million of Series 2015 Series A tax-exempts and $196.55 million of Series B taxables. The issue is rated Aa2 by Moody's and AA-minus by S&P.
JPMorgan is slated to price the Harris County Cultural Education Facilities Finance Corp.'s $193.89 million of hospital revenue bonds for the Texas Children's Hospital. The bonds are rated Aa2 by Moody's and AA by S&P and Fitch.
On Thursday, the Pennsylvania Turnpike Commission's $495.56 million of Series 2015A turnpike revenue bonds are set to be priced by Loop Capital Markets. The issue is expected to consist of $379.92 million fix-rated Series A-1 bonds and $115.64 million of Series A-2 SIFMA floating-rate notes. The issue is rated A1 by Moody's and A-plus by S&P and Fitch.
In the competitive arena, the Santa Clara Unified School District, Calif., is selling two separate offerings totaling $243.45 million on Thursday. The issues are comprised of $140.7 million of Series 2015 election of 2014 GO refunding bonds and $102.75 million of Series 2015 GO refunding bonds. Both sales are rated AA by S&P.
Also on Thursday, Milwaukee will sell a $166.11 million single issue consisting of $137.54 million Series 1015 N2 GO promissory notes and $28.57 million of Series 2015 B3 GO corporate purpose bonds. The issue is rated AA by Fitch. Milwaukee will also sell a separate issue of $125 million Series 2015 R1 revenue anticipation notes. The RANs are rated F1-plus by Fitch.
Bond Buyer Visible Supply
The Bond Buyer's 30-day visible supply calendar decreased $1.192 billion to $13.589 billion on Wednesday. The total is comprised of $4.320 billion competitive sales and $9.269 billion of negotiated deals.
MSRB Previous Session's Activity
The Municipal Securities Rulemaking Board reported 44,934 trades on Tuesday on volume of $10.583 billion.
The most active bond, based on the number of trades, was the Montgomery, Ala., Medical Clinic Board's Series 2015 1976 East first mortgage revenue bonds, Waterford Place Assisted Living Facility 7s of 2045, which traded 302 times at an average price of 98.453 with an average yield of 7.125%. The bonds were initially priced at 98.425 to yield 7.125%.
Richard Williamson contributed to this report.
