Top quality municipal bonds finished weaker along with Treasuries on Tuesday, traders said, with yields on some maturities rising by as much as six basis points.
In the primary market, Citigroup priced the Los Angeles Unified School District's $1.23 billion of general obligation and refunding bonds.
The LAUSD's $648.96 million of Election of 2008 Series 2016A GO dedicated unlimited ad valorem property tax bonds were priced to yield from 0.40% with a 5% coupon in 2017 to 3.23% with a 3.50% coupon in 2036; a 2040 split maturity was priced as 4s to yield 3.25% and as 5s to yield 2.90%.
The School District's $577.40 million of Series 2016A GO refunding dedicated unlimited ad valorem property tax bonds were priced to yield from 0.18% with a 5% coupon in 2016 to 2.35% with a 5% coupon in 2030.
The deal is rated Aa2 by Moody's Investors Service, AAA by Fitch Ratings and AA-plus by Kroll Bond Rating Agency.
Since 2006, the LAUSD has sold about $14.4 billion of bonds, with the most issuance occurring in 2007 and 2009 and when it offered $2.91 and $2.92 billion of debt, respectively. The district did not come to market in 2013.
Barclays Capital priced the New York Utility Debt Securitization Authority's $637.64 million of Series 2016A tax-exempt restructuring bonds. The deal was upsized considerably from the $382 million originally planned.
The offering was part of a $2.5 billion three-phase plan to refinance the triple-B rated bonds from the Long Island Power Authority with lower cost triple-A rated bonds from the UDSA.
"We are very pleased to announce that we were able to lock-in interest rate savings of approximately $114 million today by refinancing outstanding LIPA debt with an average interest cost of 5.2% with new UDSA debt at a cost of 2.7%," Tom Falcone, Chief Financial Officer and Chief of Staff of LIPA, said on Tuesday. "This brings total interest savings to our customers from our strategic debt refinancing plan to nearly $375 million."
The issue was priced to yield from 1.66% with a 5% coupon and 1.74% with a 5% coupon in a split 2025 maturity to 2.68% with a 5% coupon in 2035. The deal is rated triple-A by Moody's, Standard & Poor's and Fitch, and carries stable outlooks from all three rating agencies.
Citi priced the Kentucky State Property and Buildings Commission's $677.33 million of Series A Project No. 112 revenue bonds and Series B Project 112 revenue refunding bonds. The $116.45 million of Series A bonds were priced to yield from 0.53% with a 3% coupon in 2017 to 3.31% with a 5% coupon in 2036. The $560.88 million Series B bonds were priced to yield from 0.20% with a 3% coupon in 2016 to 2.93% with a 5% coupon in 2028. The deal is rated Aa3 by Moody's, A by S&P and A-plus by Fitch.
Wells Fargo Securities priced for retail investors the New York Metropolitan Transportation Authority's $591.68 million of Series 2016A dedicated tax fund refunding bonds. The issue was priced to yield from 0.81% with a 5% coupon in 2019 to 3.25% at par in 2036; 2016 and 2017 maturities were offered as sealed bids. The bonds are rated AA by S&P and Fitch.
Citi priced the New York City Municipal Water Authority's $352.86 million of Fiscal 2016 Subseries CC-1 water and sewer system second general resolution revenue bonds. The issue was priced as 4s to yield 0.92% in 2020 and 1.10% in 2021; as 4s to yield 3.03% and as 5s to yield 2.68% in a split 2033 maturity; and to yield from 2.83% with a 5% coupon in 2036 to 3.27% with a 4% coupon and 2.93% with a 5% coupon in a 2038 maturity. The deal is rated Aa1 by Moody's, and AA-plus by S&P and Fitch.
Barclays priced the California Statewide Communities Development Authority's $282.84 million of Series 2016 student housing refunding revenue bonds for the UC Irvine Campus Apartments. The issue was priced to yield from 0.40% with a 3% coupon in 2016 to 3.60% with a 3.50% coupon in 2036; a 2040 maturity was priced as 5s to yield 3.42%. The deal is rated Baa1 by Moody's.
In the competitive arena on Tuesday, Delaware sold three issues totaling $237.36 million.
Morgan Stanley won the $180.39 million of Series 2016A GOs with a true interest cost of 2.45%. The issue was priced to yield from 0.64% with a 5% coupon in 2019 to 3.17% with a 3% coupon in 2036. Bank of America Merrill Lynch won the $37.15 million of Series 2016C GO refunding bonds with a TIC of 1.63%. JPMorgan Securities won the $20.22 million of Series 2016B AMT GOs with a TIC of 0.68%. All three sales are rated triple-A by Moody's, S&P and Fitch.
Secondary Market
The yield on the 10-year benchmark muni general obligation rose five basis points to 1.81% from 1.76% on Monday, while the 30-year muni yield gained six basis points to 2.86% from 2.80%, according to the final read of Municipal Market Data's triple-A scale.
Treasuries were weaker on Tuesday. The yield on the two-year Treasury rose to 0.84% from 0.79% on Monday, while the 10-year Treasury yield gained to 1.83% from 1.74% and the 30-year Treasury bond yield increased to 2.70% from 2.62%.
The 10-year muni to Treasury ratio was calculated on Tuesday at 98.8% compared to 101.3% on Monday, while the 30-year muni to Treasury ratio stood at 105.8% versus 107.1%, according to MMD.
