NTTA deal gets warm reception from muni market
Top-quality municipal bonds ended stronger on Thursday as more than $3 billion of transportation deals hit the market.
Bank of America Merrill Lynch priced the North Texas Tollway Authority’s $2.55 billion of system revenue and refunding bonds for institutions on Thursday after holding a one-day retail order period.
Market sources said the deal was a blowout, with underwriters seeing over $19 billion in orders for the bonds. Demand allowed a repricing to lower yields in some maturities.
“The bonds were flying off the shelves and were gone before you knew it,” said one Southwest trader. “I knew it would be a hit, but I never would have guessed it would garner that many orders.” He added that he saw "bumps anywhere between three and 10 basis points and on some shorter call bonds it was even more. Very tight spreads for that rating.”
The $1.77 billion of Series 2017A first tier bonds were repriced to yield from 1.05% with a 4% and two 5% coupons in a triple-split 2019 maturity to 3.10% with a 5% coupon in 2039. A split 2043 maturity was priced as 4s to yield 3.50% and as 5s to yield 3.18%; and a 2048 maturity was priced as 5s to yield 3.23%.
The $771.23 million of Series 2017B second tier bonds were repriced to yield from 1.11% with a 4% coupon in 2019 to 3.19% with a 5% coupon in 2039. A 2043 maturity was priced as 5s to yield 3.26% and a 2048 maturity was priced as 5s to yield 3.32%.
The Series 2017A bonds are rated A1 by Moody’s Investors Service and A by S&P Global Ratings; the Series 2017B bonds are rated A2 by Moody’s and A-minus by S&P except for the 2034-2038 maturities and half of a split 2033 maturity, totaling $102.23 million and are insured by Assured Guaranty Municipal Corp., and rated A2 by Moody’s and AA by S&P.
Since 2008, NTTA has sold about $16.38 billion of securities, with the most issuance occurring in 2008 when it sold $5.18 billion. The authority did not come to market in 2013. Thursday’s sale will give NTTA its second highest yearly issuance in the past 10 years.
One New York trader said that general market conditions are tough right now, but that supply was slightly up this week and should be next week as well, something that could lead to munis under-performing the Treasury market.
“As we have seen, any weakness in the market will quickly be absorbed. It does feel like we are reaching a turning point,” he said. “With tax reform about to be announced in detail, the equity markets have little to look forward to, to continue [their] upward trajectory. Spreads are compressed throughout all of fixed income ... as we are seeing retail investors move down the credit curve in order to pick up extra yield. I think it’ll take something serious to shake up the market at this point.”
In the competitive arena, the Los Angeles County Metropolitan Transportation Authority sold $566.82 million of green bonds in two separate offerings.
Wells Fargo Securities won the $479.71 million of Series 2017A Proposition A first tier senior sales tax revenue green bonds with a true interest cost of 3.24%. The issue was priced as 5s to yield from 1.21% in 2022 to 2.70% in 2042.
Goldman Sachs won the $87.11 million of Series 2017B Proposition A first tier senior sales tax revenue refunding green bonds with a TIC of 1.26%. The issue was priced as 5s to yield 1.18% in 2022 and 1.31% in 2023.
Both deals are rated Aa1 by Moody’s and AAA by S&P.
In the negotiated sector, Citigroup priced the Southeastern Pennsylvania Transportation Authority’s $103.15 million of Series 2017 capital gran receipts refunding bonds, Federal Transit Administration Section 5337 state of good repair formula program funds.
The issue was priced as 5s to yield 1.20% in 2018 and to yield from 1.48% in 2022 to 2.51% in 2029.
The deal is rated A3 by Moody’s and AA-minus by S&P.
A group including Jefferies as senior manager and Academy Securities, Alamo Capital and Cabrera Capital Markets received the official the award on the New York Metropolitan Transportation Authority’s $172.26 million of transportation revenue variable-rate bonds/LIBOR floating-rate tender notes.
The remarketing is rated A1 by Moody’s, AA-minus by S&P and Fitch and AA-plus by Kroll Bond Rating Agency.
The $99 million of Series 2011B bonds were priced at par to yield 55 basis points over the one-month LIBOR in 2041 with a mandatory tender in 2022.
The $72.2 million of Subseries 2012G-4 bonds were priced at par to yield 55 basis points over the one-month LIBOR in 2030 with a mandatory tender in 2022.
Muni CUSIP requests fell 18% in Sept.
Total demand for new municipal CUSIP identifiers fell 18% in September after rising 38% in August, CUSIP Global Services said on Thursday.
The report tracks requests by issuers for muni identifiers as an early indicator of new volume.
A total of 934 municipal identifier requests were made last month, compared to 1,404 in August. Total requests include bonds, long- and short-term notes and other municipal securities.
On a year-over-year basis, muni request volume was down 25% through the end of September.
"Month-to-month CUSIP request volume has been volatile this year as issuers continue to tread carefully in an uncertain marketplace," said Gerard Faulkner, Director of Operations for CUSIP Global Services. "Taken as a whole, the first three quarters of this year have been consistent with a healthy volume of new securities issuance, but the persistent ebbs and flows in volume do underscore the cautious stance of many market participants."
The yield on the 10-year benchmark muni general obligation fell two basis points to 1.98% from 2.00% on Wednesday, while the 30-year GO yield dropped three basis points to 2.78% from 2.81%, according to the final read of Municipal Market Data's triple-A scale.
U.S. Treasuries were little changed on Thursday. The yield on the two-year Treasury dipped to 1.51% from 1.52% on Wednesday, the 10-year Treasury yield dropped to 2.32% from 2.34% and yield on the 30-year Treasury bond decreased to 2.88% from 2.87%.
On Thursday, the 10-year muni-to-Treasury ratio was calculated at 85.3% compared with 85.4% on Wednesday, while the 30-year muni-to-Treasury ratio stood at 97.5% versus 97.8%, according to MMD.
AP-MBIS 10-year muni skips to 2.31%
The Associated Press-MBIS 10-year municipal benchmark 5% general obligation was at 2.31% late Thursday, down from the final read of 2.32% on Wednesday, according to Municipal Bond Information Services, a national consortium of municipal interdealer brokers.
The AP-MBIS index is a yield curve built on market data aggregated from MBIS member firms and will be updated hourly on the forthcoming Bond Buyer Data Workstation.
MSRB: Previous session's activity
The Municipal Securities Rulemaking Board reported 39,331 trades on Wednesday on volume of $10.68 billion.
Tax-exempt money market funds see inflows
Tax-exempt money market funds experienced inflows of $741.4 million, raising total net assets to $128.61 billion in the week ended Oct. 9, according to The Money Fund Report, a service of iMoneyNet.com.
This followed an outflow of $40.3 million to $127.86 billion in the previous week.
The average, seven-day simple yield for the 218 weekly reporting tax-exempt funds inched up to 0.45% from 0.44% the previous week.
The total net assets of the 829 weekly reporting taxable money funds decreased $11.30 billion to $2.573 trillion in the week ended Oct. 10, after an outflow of $2.49 billion to $2.585 trillion the week before.
The average, seven-day simple yield for the taxable money funds was higher to 0.69% from 0.68% from the prior week.
Overall, the combined total net assets of the 1,047 weekly reporting money funds decreased $10.55 billion to $2.702 trillion in the week ended Oct. 10, after outflows of $2.53 million to $2.712 trillion in the prior week.