Prices of top-rated municipal bonds closed stronger on Thursday, traders said, with yields on some maturities falling by as much as three basis points as the last of the week's big issues were priced. Stadium deals from issuers in Indiana and Georgia topped the action in the primary market.
Primary Market
Goldman Sachs priced the Indiana Finance Authority's $297 million of Series 2015A stadium project lease appropriation refunding bonds.
The issue was priced to yield from 1.16% with a 5% coupon in 2018 to 3.65% with a 5.25% coupon in 2035; a 2037 term bond was priced as 5 1/4s to yield 3.71% and a 2016 maturity was offered as a sealed bid. The bonds are rated Aa2 by Moody's and AA-plus by S&P and Fitch.
According to Dennis Bassett, the IFA's public finance director, the authority has been monitoring the market for an ideal time to refund a portion of their synthetic fixed-rate structure into traditional fix-rate bonds and, therefore, eliminate a range of existing financial risks.
"This refunding will allow IFA to restructure the debt, replacing it with traditional fixed-rate bonds that are currently near historical lows in terms of interest rates," said Bassett. "This refunding will also add callability to the portfolio, which enables the state to pay off the bonds earlier if funds are available to do so. By exercising this approach, IFA anticipates the refunding will be relatively cost neutral over the remaining term of the debt."
Since 2005, the Indiana Finance Authority has sold about $16.3 billion of bonds. The largest issuance was $2.58 billion in both 2008 and 2011. The lowest issuances occurred in 2006 and 2014 when $675 million and $785 million were sold, respectively.
"Two other crucial points to be aware of include the fact IFA is in the best position to enter the market for fixed-rate bonds due to the high credit rating of the state," Bassett said. "Additionally, fixed-rate bonds do not carry any of the credit requirements typically contained in a synthetic fixed-rate structure. This transaction will not materially change the economics/debt service for the portfolio."
Bassett also said that the IFA is always looking to put the state in the best financial position as possible.
"Our financial team has run a thorough cost-benefit analysis and by executing this transaction, the IFA will reduce risk and add potential value not available in the current structure. Those two facts make this a responsible thing to do for the state," he said.
Also in the stadium financing sector, Citi priced the Atlanta Development Authority's $219.66 million of senior lien and second lien tax-exempt and taxable bonds for the new downtown Atlanta stadium project.
The $207.92 million of tax-exempts consisted of $167.53 million of Series 2015A-1 senior lien revenue bonds which were priced as 5s to yield from 2.07% in 2021 to 3.75% in 2035; a 2040 term bond was priced as 5s to yield 3.77% and a 2044 term was priced as 5 1/4s to yield 3.82%. The $40.39 million of Series 2015B second lien revenue bonds were priced to yield from 0.98% with a 4% coupon in 2017 to 3.81% with a 3.50% coupon in 2030; a 2035 term was priced as 4s to yield 4.125%, a 2040 term was priced as 4s to yield 4.21% and a 2044 term was priced as 5s to yield 4.05%.
The $16.4 million of taxable Series 2015A-2 senior lien revenue bonds were priced at par to yield from 1.41% in 2017 to 2.922% in 2021 Treasury.
The senior lien tax-exempts and taxable bonds are rated Aa3 by Moody's and A-plus by S&P while the second lien bonds are rated A1 by Moody's and A by S&P.
Loop Capital Markets priced for institutions the New York Triborough Bridge and Tunnel Authority's $225 million of Series 2015A general revenue bonds for MTA bridges and tunnels. Academy Securities is co-senior manager on the deal. A retail order period was held on Wednesday.
"In addition to paying for existing, approved capital projects, we will use $100 million of the proceeds to pay off the 2014 bond anticipation notes," said Aaron Donovan, deputy director for external communications for the MTA, Long Island Rail Road and Metro-North Railroad. "Naturally market conditions are always different. The timing for this deal is driven in part by the need to pay off the BAN's on May 15."
For institutions, the bonds were priced to yield from 0.14% with a 1% coupon in 2015 to 3.40% with a 5% coupon in 2035; a 2040 term was priced as 5s to yield 3.53%; a 2045 term was priced as 5 1/4s to yield 3.50%; and a 2050 term was priced as 5s to yield 3.77%. The 2015 and 2016 maturities were offered as sealed bids.
The issue is rated Aa3 by Moody's, AA-minus by both Standard & Poor's and Fitch Ratings and AA by Kroll Bond Rating Agency.
"The TBTA is a stellar credit and widely accepted in the market," said Donovan. "This results from strong crossing volumes and substantial revenue securing bondholders. We are the largest tolling agency in the nation by traffic volume, and the revenue is generated through a diverse portfolio of crossings, with no single facility accounting for more than 23% of the revenue."
Secondary Market
The yield on the 10-year benchmark muni general obligation fell one basis point to 2.21% from 2.22% on Wednesday, while the yield on the 30-year GO declined by three basis points to 3.15% from 3.18%, according to the final read of Municipal Market Data's triple-A scale.
Treasury prices were mostly higher on Thursday as the yield on the two-year Treasury note was unchanged at 0.63% from Wednesday, while the 10-year yield fell to 2.19% from 2.23% and the 30-year yield fell to 2.92% from 2.99%.
The 10-year muni to Treasury ratio was calculated on Thursday at 101.3x% versus 99.5% on Wednesday, while the 30-year muni to Treasury ratio stood at 108.3% compared to 106.6%, according to MMD.
Tax-Exempt Money Market Funds Post Inflow
Tax-exempt money market funds reversed course and experienced inflows of $1.16 billion, bringing total net assets to $245.84 billion in the period ended May 4, according to The Money Fund Report, a service of iMoneyNet.com. This followed an outflow of $5.36 billion to $244.69 billion in the previous week.
The average, seven-day simple yield for the 395 weekly reporting tax-exempt funds remained at 0.01% for a 105th straight week.
The total net assets of the 990 weekly reporting taxable money funds rose $7.82 billion to $2.383 trillion in the period ended May 5, after experiencing an inflow of $905.7 million to $2.375 trillion in the prior week.
The average, seven-day simple yield for the taxable money funds remained at 0.02% for the 15th consecutive week.
Overall, the combined total net assets of the 1,385 weekly reporting money funds increased $8.97 billion to $2.629 trillion in the period ended May 5, which followed an outflow of $4.45 billion to $2.620 trillion in the prior period.
