The city of Chicago’s wastewater deal received a warm reception in a strengthening municipal market on Tuesday. as the first of the week’s supply was priced.
Siebert Cisneros Shank priced and repriced Chicago’s $396.74 million of project and refunding second lien wastewater transmission revenue bonds.
The $181.14 million of Series 2017A project bonds were priced to yield from 1.53% with a 5% coupon in 2020 to 3.65% with a 5% coupon in 2037. A 2042 term bond was priced to yield 3.40% with a 5.25% coupon, a 2047 term was priced to yield 3.74% with a 5% coupon and a 2052 term was priced to yield 3.91% with a 4.00% coupon.
The $215.6 million of Series 2017B refunding bonds were priced to yield from 1.13% with a 5% coupon in 2018 to 3.66% with a 5% coupon in 2038.
The bonds are rated A by S&P Global Ratings and AA-minus by Fitch Ratings and Kroll Bond Rating Agency, with the exception of the Series 2017A’s 2042 and 2052 maturities totaling $78.76 million that are insured by Assured Guaranty Municipal and are rated AA by S&P and AA-plus by Kroll.
“The Chicago deal fared well but I am not really surprised because it matched up with the price talk from last week,” said one New York trader. “In general, our market is up and the pace settled down after all the deals cleared. There is lots of money around and prices and tighter spreads are being proven.”
RBC Capital Markets priced and repriced the Metropolitan Washington Airports Authority’s $523.785 million of Series 2017A airport system revenue refunding bonds, subject to the alternative minimum tax.
The bonds were priced to yield from 0.85% with a 1% coupon in 2017 to 3.06% with a 5% coupon in 2037. A term bond in 2042 was priced to yield 3.12% with a 5% coupon and a term bond in 2047 was priced to yield 3.18% with a 5% coupon.
The deal is rated Aa3 by Moody’s Investors service and AA-minus by S&P and Fitch.
“We are very happy with how things went,” said Andrew Rountree, CPA and vice president for finance and CFO of the MWAA. “The deal was 2.8-times oversubscribed and the market timing was perfect, although we were not trying to time the market.”
Rountree said market conditions were favorable, with yields dropping daily in recent weeks, and the deal was helped even further by a rally in the Treasury market this morning.
“It was additional wind in our sails,” he said. “We were also recently upgraded by Moody’s and I would say we attribute a five basis point savings just from that news alone.”
He also said that the all in TIC from the deal was 3.14% and generated gross savings of $116 million or present-value savings of $63 million or 14%.
Barclays Capital priced the East Bay Municipal Utility District, Calif.’s $497.13 million of Series 2017A water system revenue green bonds and Series 2017B water system revenue refunding bonds.
The $186.23 million of Series 2017A green bonds were priced to yield from 2.36% with a 5% coupon in 2032 to 3.13% with a 3% coupon in 2037. A term bond in 2042 was priced to yield 2.70% with a 5% coupon and a term bond in 2045 was priced to yield 3.14% with a 4% coupon and 2.74% with a 5% coupon in a split maturity.
The $310.895 million of Series 2017B bonds were priced to yield 0.83% with a 5% coupon in 2019 and to yield 1.03% with a 5% coupon in 2021. The bonds were also priced to yield from 1.73% with a 5% coupon in 2026 to 2.62% with a 5% coupon in 2037.
The deal is rated Aa1 by Moody’s, AAA by S&P and AA-plus by Fitch.
Morgan Stanley priced the Regional Transportation District, Colo.’s $120.09 million of Series 2017B sale tax revenue bonds for the Fasttracks Project.
The issue was priced to yield from 2.66% with a 5% coupon in 2033 to 3.13% with a 4% coupon in 2036.
The deal is rated Aa2 by Moody’s, AA-plus by S&P and AA by Fitch.
In the short-term negotiated sector, Citigroup priced Los Angeles County, Calif.’s $800 million of 2017-2018 tax and revenue anticipation notes.
The notes were priced as 5s to yield 0.90% in 2018 with no optional call and interest paid at maturity.
The TRANs are rated MIG1 by Moody’s, SP1-plus by S&P and F1-plus by Fitch.
Since 2007, the county has issued roughly $10.40 billion of notes, with the highest amount occurring in 2009 through 2011 when it sold $1.3 billion in each of those years. The county saw low note issuance in 2007 and 2008, when it issued just $500 million.
Bank of America Merrill Lynch priced the Board of regents of the Texas A&M University’s $496.9 million of tax-exempt and taxable bonds.
The $398.71 million of Series 2017B taxable revenue financing system bonds were priced to yield from 1.455% at par and with a 4.878% coupon in a split 2018 maturity to 3.386% at par in 2032.
The $98.19 million of Series 2017C tax-exempts were priced to yield from 0.81% with a 3% coupon in 2018 to 3.20% with a 3.125% coupon in 2037; a 2039 maturity was priced as 5s to yield 2.79%.
The deal is rated triple-A by Moody’s, S&P and Fitch.
In the competitive arena on Tuesday, the Virginia College Building Authority sold $251.04 million of Series 2017A & B education facilities revenue and revenue refunding bonds for the 21st Century College and equipment program. Citigroup won the deal with a true interest cost of 1.58%.
The $76.04 million of Series 2017A revenue bonds were priced as 5s to yield from 0.80% in 2018 to 1.47% in 2024.
The $175 million of Series 2017B revenue refunding bonds were priced as 5s to yield from 0.80% in 2018 to 2.04% in 2028.
The deal is rated Aa1 by Moody’s and AA-plus by S&P and Fitch.
Seattle, Wash., sold $239.92 million of Series 2017 drainage and wastewater system improvement and refunding revenue bonds.
PNC Capital Markets won the deal with a TIC of 3.15%. Pricing information was not available.
The deal is rated Aa1 by Moody’s and AA-plus by S&P.
Orange County, Fla., sold $194.74 million of Series 2017 tourist development tax refunding revenue bonds.
Wells Fargo Securities won the deal with a TIC of 2.05%. The issue was priced as 5s to yield from 0.88% in 2018 to 1.35% in 2022 and from 1.83% in 2025 to 2.50% in 2030.
The deal is rated Aa3 by Moody’s, AA-minus by S&P and AA by Fitch.
The New Hampshire Bond Bank sold $118.71 million of Series 2017B revenue bonds. BAML won the deal with a TIC of 2.98%.
The issue was priced to yield from 0.80% with a 5% coupon in 2018 to 3.15% with a 3% coupon in 2037. A term bond in 2042 was priced to yield 3.18% with a 4% coupon and a term bond in 2046 was priced to yield 3.23% with a 4% coupon.
The deal is rated Aa2 by Moody’s and AA-plus by S&P.
The yield on the 10-year benchmark muni general obligation fell three basis points to 1.83% from 1.86% on Monday, while the 30-year GO yield decreased three basis points to 2.66% from 2.69%, according to the final read of Municipal Market Data's triple-A scale.
The New York trader said that things were firming in the muni market on Tuesday, with participants concerned about what could happen this week.
“You got three potential market movers happening Thursday: the European Central Bank meeting, former FBI Director James Comey testifying before Congress, and the election in the U.K.”
U.S. Treasuries were also stronger on Tuesday. The yield on the two-year Treasury dropped to 1.29% from 1.31% on Monday as the 10-year Treasury yield declined to 2.15% from 2.18% while the yield on the 30-year Treasury bond decreased to 2.81% from 2.84%.
The 10-year muni to Treasury ratio was calculated at 85.5% on Tuesday, compared with 85.2% on Monday, while the 30-year muni to Treasury ratio stood at 94.8% versus 94.7%, according to MMD.
MSRB: Previous session's activity
The Municipal Securities Rulemaking Board reported 40,424 trades on Monday on volume of $7.06 billion.
Ramirez: Gross supply to decline
Gross municipal bond supply in May was $39 billion, up 35% month over month and up 3% compared to May 2016, with year to date gross issuance running at $151 billion, down 5% year over year, according to Ramirez & Co.’s weekly market comment.
“Given the trend of low gross issuance year-to-date, we reaffirm our long-term new issue gross supply forecast at $368 billion, for a decline of about $60 billion, or 14% year over year,” the report said. “Our supply forecast incorporates $204 billion of new money bonds and $164 billion of refundings.”
The report said that net supply through May was up $1.4 billion, but added that in the next 30 days the market will shrink by around $38 billion as bonds mature or are called early.
Ramirez estimates that coupon payments in June will be about $54 billion.
“States driving the supply deficit include New York (-$8.94 billion), California (-$7.11 billion), New Jersey (-$4.36 billion), Arizona (-$2.41 billion), and Pennsylvania (-$1.87 billion),” the report said.