Prices of top-rated municipal bonds closed lower again on Tuesday, according to traders, with yields on some maturities rising by three basis points.
Meanwhile, a slew of new municipal issues came to market, led by the retail pricing of the Salt River Project's $887 million of revenue bonds and the institutional pricing of Connecticut's $500 million of general obligation bonds.
JPMorgan priced the Salt River Project Agricultural Improvement Power District, Ariz.'s $886.54 million of Series 2015A Salt River Project electric system revenue bonds for retail investors. The institutional pricing is set for Wednesday.
The bonds were priced 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 will produce about $300 million of new money for SRP's capital projects, with the rest of the bonds refunding outstanding debt for savings.
"SRP has threshold savings targets it uses to determine the desire to refund bonds," said Steve Hulet, SRP's Corporate Treasurer. "Currently, the markets are meeting those threshold targets for refunding a good portion, if not all, of the District's outstanding 2004 Series A, 2005 Series A, and 2006 Series A revenue bonds."
Siebert Brandford Shank priced Connecticut's $500 million of Series 2015B GO bonds for institutions after a one-day retail order period. The GOs were priced to yield from 1.19% with 2% and 5% coupons in a split 2018 maturity to 3.96% with a 4% coupon and 3.58% with a 5% coupon in a split 2035 maturity. The 2016 and 2017 maturities were offered as sealed bids. On Monday, the bonds were priced for retail to yield from 1.11% with 2% and 4% coupons in a split 2018 maturity to 3.74% with a 4% coupon in 2035.
The bonds are rated Aa3 by Moody's and AA by S&P and Fitch Ratings. Moody's has a stable outlook on the bonds while S&P and Fitch assign negative outlooks.
The state will be back in the market again next week, with $480 million of Series 2015C SIFMA-indexed bonds.
"For this particular sale, we have carved $25 million per year from the 2015 Series B bonds during the first 10 years of principal amortization, which will then be matched with $25 million per year amortization for the same time period with the 2015 Series C SIFMA-index bonds," said Sarah K. Sanders, assistant treasurer for debt management in the Connecticut State Treasurer's office. "These are the maturities which are most popular for SIFMA-indexed bond investors."
Sanders said this approach allows Connecticut to make the most of the retail order period on the fixed-rate bond sale. It plans to adjust the amortization schedule, if needed, between the two sales for the first 10 years to fill all retail orders within the maturity limits.
"Selling the fixed-rate bonds first and the SIFMA-indexed bonds the following week allows this strategy to work well," she added.
Since 1995, Connecticut has issued over $34 billion of GOs. The years that saw the most issuance were 2008 and 2014, when $3.62 billion and $2.55 billion were sold, respectively. The least amount of issuance was in 1997 and 1999, when $636.8 million and $775 million were sold, respectively.
The Montgomery County Industrial Development Authority, Pa., came to market with two issues totaling $347 million offered as a remarketing.
JPMorgan remarketed the IDA's $199.24 million of pollution control revenue refunding bonds for the Peco Energy Company project. The $82.56 million of 1994 Series A non-AMT bonds were priced at par to yield 2.55% in 2029. The $34 million of 1996 Series A non-AMT bonds were priced at par to yield 2.60% in 2034. The $13.88 million of 1999 Series B AMT bonds were priced at par to yield 2.70% in 2034, The $68.80 million of 2001 Series B non-AMT bonds were priced at par to yield 2.50% in 2030. The issue has a mandatory put date in 2020 and is rated Baa2 by Moody's and BBB by S&P.
Morgan Stanley remarketed the IDA's $147.8 million of pollution control revenue refunding bonds for the Peco Energy Company and Exelon Generation Company projects. The $13.34 million Peco 1994 Series B non-AMT bonds were priced at par to yield 2.55% in 2029. The $91.78 million of Peco 1999 Series B non-AMT bonds were priced at par to yield 2.50% in 2030. The $13.15 million of Exelon 2001 Series A AMT bonds were priced at par to yield 2.70% in 2034. The $29.53 million of Exelon 2002 Series A non-AMT bonds were priced at par to yield 2.55% in 2029. The issue has a mandatory put date in 2020 and is rated Baa2 by Moody's and BBB by S&P.
Goldman, Sachs priced the Mid-Bay Bridge Authority, Fla.'s $282.93 million of first senior lien and second senior lien tax-exempt and first senior lien taxable revenue bonds. The $221.38 million of Series 2015A tax-exempt first senior lien revenue bonds were priced as 5s to yield from 2.63% in 2021 to 3.90% in 2030; a 2035 term bond was priced as 5s to yield 4.10% and a 2040 term was priced as 5s to yield 4.25% while a 2040 AGM-insured term was priced as 4s to yield 4.25%. The $24.8 million of Series 2015B taxable first senior lien revenue bonds were priced as a 2021 bullet maturity to yield 220 basis points above the comparable Treasury security. The two issues are rated BBB-plus by S&P and Fitch Ratings. The $36.75 million of Series 2015C tax-exempt second senior lien revenue bonds were priced as 5s to yield from 1.33% in 2016 to 3.65% in 2025; a 2030 term was priced as 5s to yield 4.15%, a 2035 term was priced as 5s to yield 4.36% and a 2040 term was priced as 5s to yield 4.48%. The bonds are rated BBB by S&P and Fitch.
Bank of America Merrill Lynch priced the Illinois Finance Authority's $129.54 million of Series 1015 revenue bonds for Northwestern University. The bonds were priced to yield from 1.99% with a 5% coupon in 2022 to 3.07% with 5% and 3% coupons in a split 2028 maturity. The issue is rated triple-A by Moody's, S&P and Fitch.
And in the green bond sector, Bank of America Merrill Lynch received the written award for Ashville, N.C.'s $50.63 million of Series 2015 water system revenue refunding green bonds. The bonds were priced to yield from 0.23% with a 2% coupon in 2016 to 3.57% with a 3.5% coupon in 2032. The deal is rated Aa2 by Moody's and AA by S&P.
Secondary Market
The yield on the 10-year benchmark muni general obligation 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. Trading was active, according to Interactive Data.
Treasury prices were mostly lower as the yield on the two-year Treasury note was unchanged at 0.60% from Monday, while the 10-year yield rose to 2.27% from 2.24% and the 30-year yield increased to 3.02% from 3.01%.
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.
