Prices of top-rated municipal bonds finished higher on Tuesday, traders said, as yields on some maturities fell by as much as four basis points.
In the primary market, the New York City Housing Development Corp. came to market with a $565 million deal in the negotiated sector while Baltimore County, Md., sold two high-quality issues totaling $168 million in the competitive arena.
JPMorgan priced the New York City HDC's $564.57 million of fixed-rate multi-family housing revenue bonds (Sustainable Neighborhood Bonds).
The issue was structured as $497.17 million of Series 2015 D-1 bonds, $64.14 million of 2015 Series D-2 bonds and $3.26 million of Series 2014 Series I bonds. The bonds were rated Aa2 by Moody's Investors Service and AA-plus by Standard & Poor's.
The Series 2015 D-1 bonds, due Nov. 1 and May 1, were priced all at par to yield from 0.85% in a split 2017 maturity to 3.30% in 2026; a 2030 maturity yields 3.70%, a 2035 maturity yields 3.95%, a 2040 maturity yields 4.20%, a 2045 maturity yields 4.25% and a 2048 maturity yields 4.35%. The Series 2015 D-2 bonds, due Nov. 1 and May 1, were priced all at par to yield from 0.45% and 0.50% in a split 2016 maturity to 3.40% in a split 2026 maturity. The Series 2015 I bonds, due Nov. 1, 2018 were priced as a remarketing at par to yield 1.45%.
Sustainable Neighborhood bonds are a new category of social investment bonds in America. "This transaction was very well received," Alan Jaffe, Executive Director at J.P. Morgan, said in an interview with The Bond Buyer.
"The importance of this transaction lies in several points," he said. "In addition to being the largest housing transaction in the municipal sector so far this year, it is a first for affordable housing in the United States in targeting socially beneficial projects via a specific bond designation, the Sustainable Neighborhood Bonds."
He praised the HDC for taking the lead in creating awareness and excitement for the deal. "HDC leadership has been at the forefront of investor outreach, consistently generating investor participation through their own efforts" Jaffe said. "HDC has conducted investor meetings and were able to generate additional investors from both the sustainable and the CRA sectors."
The HDC said the transaction will help residents by providing a safe and secure environment where New Yorkers can live.
"The financing will create and preserve safe, quality affordable housing that provides deeper levels of affordability, serves some of the most vulnerable New Yorkers, and fosters greater economic diversity and stronger neighborhoods," HDC President Gary Rodney told The Bond Buyer last week.
In the competitive arena, Barclays Capital won Baltimore County's $97.89 million of Series 2015 Metropolitan District refunding bonds with a true interest cost of 2.65%. The bonds were priced to yield from about 0.36% with a 2% coupon in 2016 to 3.24% with a 3.50% coupon in 2030. Barclays also won the county's $69.59 million of Series 2015 consolidated public improvement refunding bonds with a TIC of 2.28%. The bonds were priced to yield from about 0.36% with a 2% coupon in 2016 to 2.60% with a 5% coupon in 2027.
Both issues were rated triple-A by Moody's Investors Service, Standard & Poor's and Fitch Ratings.
A muni trader said the deal held no surprises.
"It came where I figured it would come. The structure on the '27 and '28 is a little rich for some people, but I think it's where it should be and I don't think it was priced wrong," said a New York trader.
The county last sold comparable bonds competitively on June 25, 2012, when Bank of America Merrill Lynch won $74.61 million of Series 2014C Metropolitan District refunding bonds.
Goldman, Sachs held a second day of a retail order period for the New York City Transitional Finance Authority's $750 million of Series S-2 Fiscal 2015 building aid revenue bonds. The new money BARBs will be priced for institutions on Wednesday.
The bonds were priced for retail on Day 2 to yield from 1.13% with 2% and 5% coupons in a split 2018 maturity to 3.45% with a 5% coupon in 2035; a 2044 term bond was priced as 4s to yield about 4.029%; a 2044 term bond was priced as 4s to yield about 4.029%. The 2016 and 2017 maturities were offered as sealed bids; no retail orders were taken in the 2028 through 2030 maturities, in the 2032 through 2034 maturities or in the 2040 or 2042 maturities. The BARBs were rated Aa2 by Moody's and AA by S&P and Fitch.
Since 1995, the HDC has sold about $18 billion of bonds, with the most issuance coming in 2-13 and 2014 when it sold $1.77 billion and 1.93 billion, respectively. The least amount of issuance occurred in 1995 and 1997, when it issued $242 million and $304 million, respectively.
Secondary Market
The yield on the 10-year benchmark muni general obligation fell two basis points to 2.29% from 2.31% on Monday, while the yield on the 30-year GO dropped four basis points to 3.25% from 3.29%, according to a read of Municipal Market Data's triple-A scale.
Trading was light to moderate, according to Interactive Data, ahead of the Federal Open Market Committee's monetary policy statement on Wednesday afternoon.
Treasury prices were higher on Tuesday with the yield on the two-year Treasury note falling to 0.69% from 0.70% on Monday, while the 10-year yield decreased to 2.31% from 2.36% and the 30-year yield dropped to 3.05% from 3.09%.
The 10-year muni to Treasury ratio was calculated on Tuesday at 98.9% versus 98.0% on Monday, while the 30-year muni to Treasury ratio stood at 106.6% compared to 106.5%, according to MMD.
