The municipal market was unchanged with a slightly firmer tone yesterday amid light to moderate secondary trading activity, as some of the week’s largest scheduled deals were priced in the primary market.
“It seems a little better,” a trader in New York said. “There’s some buying going on. It’s mostly small, but it seems like a lot of what is around the Street is starting to clean up all the existing bonds. The change in scale may be a basis point or two, because there are not a lot of blocks trading. There is no effect from the Treasury market. I don’t see people looking at it much.”
“It’s very stable, very constructive tone today,” a trader in Los Angeles said. “As far as California goes, there’s a little less supply than in the current market. In the general market, it seems like most of the deals are getting done. I would tell you that deal inventories still look a little bit heavy. But there seems to be some activity going on so, for the first time in a while, there’s a more constructive tone.”
In the new-issue market yesterday, a $1.35 billion offering of subordinate sales tax revenue bonds from the Puerto Rico Sales Tax Financing Corp. was priced by Citi.
The deal consists of current interest serial bonds maturing from 2036 to 2042, capital appreciation bonds from 2035 to 2040, and convertible bonds in 2035.
Bonds from the $1.30 billion series of current interest bonds mature from 2036 to 2042, with yields ranging from 5.41% with a 5.375% coupon in 2036 to 5.16% with a 5.125% coupon in 2042. The bonds are callable at par in 2020.
The Puerto Rico bonds, known by the Spanish acronym for the issuer, COFINA, are subordinate in payment to the senior bonds and parity obligations of the corporation.
They are expected to be rated A1 by Moody’s Investors Service and A-plus by Standard & Poor’s and Fitch Ratings.
The Treasury market showed some gains yesterday.
The benchmark 10-year note was quoted near the end of the session at 3.17% after opening at 3.24%. The 30-year bond finished at 4.10% after opening at 4.16%. The two-year note finished at 0.69% after opening at 0.71%.
The Municipal Market Data triple-A scale yielded 2.96% in 10 years and 3.78% in 20 years yesterday, following levels of 2.97% and 3.78% Monday. The scale yielded 4.08% in 30 years yesterday, matching Monday.
Monday’s triple-A muni scale in 10 years was at 91.7% of comparable Treasuries and 30-year munis were at 97.8%, according to MMD, while 30-year tax-exempt triple-A general obligation bonds were at 103.8% of the comparable London Interbank Offered Rate.
Elsewhere in the new-issue market yesterday, a $554 million sale of second-resolution water and sewer system revenue debt was priced for the New York City Municipal Water Finance Authority by senior book-running manager Morgan Keegan & Co.
The deal included $230 million of 10-year par call bonds and $324 million of make-whole call bonds.
The yield on the par call bonds was 6.12% in 2042, the only maturity offered, according to a press release from the issuer.
Net of the 35% federal subsidy, the yield is 3.98%. The yield on the make-whole call bonds was 5.72% in 2042, the only maturity offered, or 3.72% after the subsidy.
The authority’s second-resolution bonds are rated Aa2 by Moody’s and AA-plus by both Standard & Poor’s and Fitch.
Barclays Capital priced $334.1 million of GO refunding debt for the Texas Public Finance Authority in two series.
Bonds from the $180.7 million Series A mature from 2013 through 2030, with yields ranging from 1.16% with a 5% coupon in 2013 to 4.12% with a 5% coupon in 2030. The bonds are callable at par in 2020.
Bonds from the $153.5 million Series B mature from 2013 through 2018, with yields ranging from 1.16% with a 5% coupon in 2013 to 2.89% with a 4% coupon in 2018. The bonds are not callable.
The credit is rated Aaa by Moody’s, AA-plus by Standard & Poor’s, and AAA by Fitch.
Bank of America Merrill Lynch priced $174.3 million of revenue bonds for the Washington Health Care Facilities Authority.
The bonds mature in 2030 and have split maturities in 2032 and 2039. Yields range from 4.97% with a 4.875% coupon in 2030 to 5.13% with a 5% coupon in 2039.
The bonds, which are callable at par in 2020, are rated Aa2 by Moody’s and AA by both Standard & Poor’s and Fitch.
Morgan Stanley priced $100 million of revenue bonds for the Louisiana Local Government Facilities and Community Development Authority.
The bonds, which are callable at par in 2020, mature in 2029, yielding 6.50% priced at par, and are rated Ba2 by Moody’s and BB-plus by Standard & Poor’s.
Final pricing details were released on Bank of America Merrill’s sale of $250 million of GO bonds for Massachusetts.
The bonds mature from 2011 through 2020, with yields ranging from 0.77% with a 2% coupon in 2012 to 3.22% with a 5% coupon in 2020.
The bonds, which are not callable, are rated Aa1 by Moody’s, AA by Standard & Poor’s, and AA-plus by Fitch.
In economic data released yesterday, existing home sales decreased at a 2.2% annual rate to 5.66 million units sold in May.
April’s sales figures were revised higher to 5.79 million from 5.77 million reported last month.
Economists polled by Thomson Reuters expected 6.15 million existing home sales in May, according to the median estimate.
Priti Patnaik contributed to this column.