Top-rated municipal bonds finished stronger on Wednesday, traders said, as big deals from the state of New Jersey and Energy Northwest came to market.
Traders wrapped up the last full day of the week and expect a quiet half-day of trading on Thursday ahead of a full market close on Friday.
Primary Market
Citigroup priced the state of New Jersey's $131.33 million of general obligation refunding bonds.
The issue was priced as 5s to yield from 1.00% in 2017 to 2.36% in 2023. The deal is rated A2 by Moody's and A by S&P, Fitch and Kroll Bond Rating Agency.
Late Tuesday, S&P revised its outlook on New Jersey's GOs to negative from stable. Moody's also has a negative outlook on the state while Fitch and Kroll maintain a stable outlook on the credit.
The state has not been in the market with GOs since 2014 when it competitively sold $525 million of various purpose GOs. Bank of America Merrill Lynch won those bonds with a true interest cost of 3.32%. For comparison, a 2023 maturity in that deal was priced as 5s to yield of 2.48%. The bonds at that time were rated A1 by Moody's and A by S&P and Fitch.
Since 2006, New Jersey has sold about $3 billion of GOs, with the largest issuance occurring in 2009 when it issued $832 million of bonds. The state did not sell GOs in 2011, 2012 or 2015.
Janney Municipal Strategist Alan Schankel said a GO sale is relatively rare for the Garden State, "since the vast majority of state borrowing uses appropriation-backed bonds."
He cited pension funding as a big minus facing the state.
"Underlying the state's fiscal challenges and structural imbalance are poorly funded pensions, with the funded ratio dropping to 37.5% as of July 1, 2015, from 42.5% in the prior year," he wrote in a Wednesday market comment. "New Jersey is among the wealthiest of states, but its recovery has lagged with 2014 GDP growth of only 0.4% compared to 2.2% for the country as a whole."
Also in the market on Wednesday was the New Jersey Building Authority with a $97.59 million deal. Citi priced the Series 2016A state building revenue refunding bonds with a top yield of 4.10% with a 4% coupon in 2030. The bonds are rated A3 by Moody's and A-minus by S&P and Fitch except for the 2025-2029 maturities which are insured by Build America Mutual and rated AA by S&P.
Elsewhere in New Jersey, Bayonne issued $69.43 million of insured by BAM. RBC Capital Markets priced the Series 2016 bonds in two series. The $66 million of qualified general improvement refunding bonds backed by the state's Municipal Qualified Bond Act were priced with a top yield of 3.41% with a 5% coupon in 2039. The bonds are rated A3 by Moody's and AA by S&P.
The $3.43 million of school refunding bonds backed by the School Bond Reserve Act were priced with a top yield of 2.53% with a 4% coupon in 2025. These bonds were rated A2 by Moody's and AA by S&P.
Bank of America Merrill Lynch priced Energy Northwest's $493.97 million bond deal on Wednesday.
The $194.85 million of Series 2016A Project 1 electric revenue refunding bonds were priced as 5s to yield 2.01% in 2025 and 1.55% in 2026. The $89.25 million of Series 2016A Columbia Generating Station electric revenue refunding bonds were priced as 5s to yield 0.79% in 2018, 1.34% in 2021, 1.49% in 2022, 1.66% in 2023, 1.83% in 2024, 2.33% in 2028 and 2.64% in 20327. The $199.08 million of Series 2016A Project 3 electric revenue refunding bonds were priced as 5s to yield 0.79% in 2018, 2.11% in 2026 and 2.24% in 2027.
The $1.29 million of Series 2016B Project 1 taxable electric revenue refunding bonds were priced at par to yield 1.65% in 2019. The $4.09 million of Series 2016B Columbia Generating Station taxable electric revenue refunding bonds were priced at par to yield 1.65% in 2019 and 3.20% in 2028. The $5.43 million of Series 2016B Project 3 taxable electric revenue refunding bonds were priced at par to yield 1.65% in 2019 and 3.05% in 2027.
The issue is rated Aa1 by Moody's Investors Service, AA-minus by Standard & Poor's and AA by Fitch Ratings.
JPMorgan Securities priced the Pennsylvania Housing Agency's $162.1 million of Series 2016-119 single-family mortgage revenue bonds not subject to the alternative minimum tax. The deal was priced at par to yield from 0.60% in 2016 to 2.80% and 2.85% in a split 2027 maturity, and 3.20% in 2031 and 3.50% in 2036; a 2041 PAC bond was priced as 3 1/2s to yield 1.97% in 2041. The bonds are rated Aa2 by Moody's and AA-plus by S&P.
Citi priced the city and county of Denver's $242.68 million of dedicated tax revenue refunding and improvement bonds. The bonds were priced to yield from 1.45% with a 2% coupon in 2021 to 2.83% with a 3% coupon in 2029. They were also priced to yield from 3.52% with a 3.375% coupon in 2041 to 3.04% with a 5% coupon in 2042. Term bonds in 2044 and 2046 were priced to yield 3.06% and 3.48% with a 5% coupon and 4% coupon, respectively. The bonds are rated Aa3 by Moody's, AA-minus by S&P and AA by Fitch.
RBC Capital Markets priced the Wisconsin Housing and Economic Development Authority's $180 million of Series 2016A AMT and Series 2016B non-AMT homeownership revenue bonds. Pricing details were not available. The issue is rated Aa2 by Moody's and AA by S&P.
Since 2006, the HEDA has sold about $2.25 billion of debt. The biggest sale came in 2006 when the authority sold $678 million of bonds and the lowest issuance occurred in 2011 when it issued $9 million of debt.
Secondary Trading
The yield on the 10-year benchmark muni general obligation fell two basis points to 1.82% from 1.84% on Tuesday, while the 30-year muni yield dropped two basis points to 2.76% from 2.78%, according to the final read of Municipal Market Data's triple-A scale.
U.S. Treasuries were higher on Wednesday. The yield on the two-year Treasury dropped to 0.85% from 0.89% on Tuesday, while the 10-year Treasury yield fell to 1.88% from 1.93% and the 30-year Treasury bond yield declined to 2.66% from 2.72%.
The 10-year muni to Treasury ratio was calculated on Wednesday at 97.2% compared with 95.2% on Tuesday, while the 30-year muni to Treasury ratio stood at 104.1% versus 102.3%, according to MMD.
