Prices of top-rated municipal bonds finished weaker on Thursday, traders said, as a $1 billion deal from New York’s Long Island Power Authority came to market along with a $748 million offering from Hawaii.
Bank of America Merrill Lynch priced LIPA’s $1 billion of Series 2015 restructuring bonds issued through the Utility Debt Securitization Authority after holding a one-day retail order period on the offering.
The UDSA bonds, due June 15 and Dec. 15, were priced to yield from 1.44% with a 5% coupon in a split 2023 maturity to 3.37% with a 4% coupon in a split 2037 maturity.
On Wednesday, the bonds were priced for retail to yield from 1.48% with a 5% coupon in a split maturity in 2023 to 3.39% with a 4% coupon in a split 2037 maturity. No retail orders were taken in the 2028 or 2033 through 2036 maturities.
The bonds were rated triple-A by Moody’s Investors Service, Standard & Poor’s and Fitch Ratings. The sale of the top-rated UDSA bonds refinanced triple-B rated LIPA bonds.
The transaction was well received by investors, LIPA said, with the deal seeing over $250 million of retail orders on Wednesday and $1.5 billion of institutional orders on Thursday.
LIPA said the strong market reception let the UDSA cut the cost of its financing by about five basis points between Wednesday morning and Thursday afternoon, saving customers an additional $5 million.
The old LIPA bonds had an average cost of 5.54%, while the new UDSA bonds have an average cost of 3.40%, a reduction of 2.14%.
“The refinancing saves our customers $128 million (net present value), including $102 million during the three-year rate plan of 2016-2018 (the rate plan goal is $172 million from 2016-2018),” a LIPA spokesman told The Bond Buyer. “The UDSA plans to refinance an additional $1.5 billion of bonds for additional savings over the next three years, including a financing in March 2016 and September 2016.”
BAML also priced the state of Hawaii’s $747.69 million of Series 2015 general obligation bonds, Series ET, EU, EV, EW, EX, EY, EZ and FA, for institutions after a retail order period on Wednesday.
The $190 million of series ET bonds were priced for retail to yield from 0.85% with a 4% coupon in 2018 to 3.46% with a 4% coupon in 2035. The $35 million of Series EU green bonds were priced to yield from 0.84% with a 2% coupon in 2018 to 3.55% with a 3.50% coupon in 2035. The $23.65 million of Series EX bonds were priced to yield from 1.06% with a 4% coupon in 2019 to 2.29% with a 3% coupon in 2025.
The $8.7 million of Series EV bonds were priced as 2s to yield 0.10% in a 2018 bullet maturity. The $34.75 million of Series WW bonds were priced as a 2018 bullet maturity as 5s to yield 0.85%. The $213.62 million of Series EY bonds were priced as 5s to yield from 1.33% in 2020 to 2.52% in 2027. The $216.98 million of Series EZ bonds were priced as 5s to yield from 1.06% in 2019 to 2.63% in 2028. The $25 million of Series FA taxable bonds were priced to yield from 1.33% with a 1.33% coupon to 4.40% with a 4.40% coupon in 2035.
The deal was rated Aa2 by Moody’s and AA by S&P and Fitch.
Piper Jaffray priced the Texas Public Finance Authority’s $369.8 million of Series 2015C taxable general obligation and refunding bonds. The issue was priced at par to yield from 0.35% in 2016 to 4.108% in 2035. The issue was rated triple-A by Moody’s, S&P and Fitch.
JPMorgan Securities priced the Pennsylvania Turnpike Commission’s $192.22 million of Series 2015B turnpike subordinate revenue bonds. The issue was priced to yield from 1.47% with a 4% coupon to 3.70% with a 5% coupon in 2035; a 2040 split term bond was priced as 5s to yield 3.90% and 3.32% while a 2045 term was priced as 5s to yield 3.97%. The bonds were rated A3 by Moody’s and A-minus by S&P and Fitch.
Secondary Trading
Municipal bond prices finished weaker. The yield on the 10-year benchmark muni general obligation was one basis point stronger at 2.02% from 2.01% on Wednesday, while the yield on the 30-year GO was one basis point stronger at 3.07% from 3.06%, according to the final read of Municipal Market Data's triple-A scale.
Treasury prices were lower on Thursday, with the yield on the two-year Treasury rising to 0.59% from 0.55% on Wednesday, while the 10-year yield rose to 2.02% from 1.98% and the 30-year yield increased to 2.87% from 2.84%.
The 10-year muni to Treasury ratio was calculated on Thursday at 99.9% versus 101.6% on Wednesday, while the 30-year muni to Treasury ratio stood at 106.9% compared to 107.9%, according to MMD.
Tax-Exempt Money Market Funds Post Outflows
Tax-exempt money market funds experienced outflows of $64.8 million, bringing total net assets to $246.88 billion in the period ended Oct. 12, according to The Money Fund Report, a service of iMoneyNet.com. This followed an inflow of $2.99 billion to $246.95 billion in the previous week.
The average, seven-day simple yield for the 377 weekly reporting tax-exempt funds remained at 0.01% for the 128th straight week.
The total net assets of the 950 weekly reporting taxable money funds rose $12.52 billion to $2.479 trillion in the period ended Oct. 13, after an inflow of $8.17 billion to $2.466 trillion the previous week.
The average, seven-day simple yield for the taxable money funds remained at 0.02% for the 39th week in a row.
Overall, the combined total net assets of the 1,327 weekly reporting money funds increased $12.46 billion to $2.725 trillion in the period ended Oct.13, which followed an inflow of $11.17 billion to $2.713 trillion the week before.
MSRB Previous Session's Activity
The Municipal Securities Rulemaking Board reported 35,335 trades on Wednesday on volume of $7.028 billion.
