The municipal market was slightly firmer yesterday as a slew of new issuance hit the primary market, including three sizeable Build America Bond deals.In the new-issue market, Barclays Capital priced $601.1 million of I-JOBS special obligation bonds for Iowa in two series, including over $220 million of taxable BABs. Bonds from the $380.1 million tax-exempt Series A mature from 2011 through 2029, with yields ranging from 1.20% with a 5% coupon in 2011 to 4.64% with a 4.625% coupon in 2029. Thee bonds are callable at par in 2019.
Bonds from the $221 million Series B of taxable BABs mature in 2034, yielding 6.80% with a 6.75% coupon, or 4.39% after the 35% federal subsidy. The bonds were priced to yield 250 basis points over the comparable Treasury yield. The bonds are also callable at par in 2019. The credit is rated Aa3 by Moody's Investors Service and AA by Standard & Poor's.
Merrill Lynch & Co. priced $622.2 million of bonds for the North Carolina Turnpike Authority in two series, including over $350 million of taxable BABs. The $352.6 million series of taxable BABs matures from 2017 through 2021, with term bonds in 2025 and 2039. Yields range from 4.83% with a 4.8% coupon in 2017 to 6.72% with a 6.7% coupon in 2039. After the 35% federal subsidy, coupons range from 3.12% in 2017 to 4.355% in 2039.
The bonds were priced to yield between 140 and 240 basis points of comparable Treasuries. Bonds maturing in 2025 and 2039 are callable at par in 2019. All other maturities are subject to a make-whole call. The bonds are rated Aa2 by Moody's, AA by Standard & Poor's, and AA-minus by Fitch Ratings.
Of the $269.6 million of tax-exempt debt, $234.7 million of triangle expressway senior lien tax-exempt revenue bonds mature from 2019 through 2026, with term bonds in 2029 and 2039. Yields range from 4.60% with a 4.5% coupon in 2019 to 5.80% with a 5.75% coupon in 2039. The bonds are callable at par in 2019. The remaining $34.9 million are capital appreciation bonds, maturing from 2030 to 2038, with yields to maturity ranging from 6.74% to 7.10%. The bonds are not callable. Both the tax-exempt and capital appreciaton bonds are insured by Assured Guaranty Corp.
JPMorgan priced $323.9 million of taxable and tax-exempt bonds for the Illinois Municipal Electric Agency, including nearly $300 million of BABs. Bonds from the $295.5 million taxable Series C of BABs mature from 2016 through 2023, with a term bond in 2035, and are subject to a make-whole call. The bonds were priced to yield between 180 and 270 basis points over comparable Treasury yields. The bonds are rated A1 by Moody's and A-plus by Standard & Poor's and Fitch, except bonds maturing in 2019, which are insured by Assured Guaranty.
The deal also contains $11.4 million of Series A tax-exempt power supply revenue bonds, which mature in 2015 and 2016 and yield 3.47% with a 4% coupon and 3.75% with a 5% coupon, respectively, and a taxable $17 million series of power supply system revenue bonds, which mature from 2013 through 2015, and yield between 180 and 250 basis points of comparable Treasuries.
Meantime, Washington competitively sold $765 million of bonds in three series, all to JPMorgan. Bonds from the $401.4 million series of motor vehicle fuel tax general obligation bonds, which were sold at a true interest cost of 4.27%, mature from 2010 through 2032, with a term bond in 2034. They are callable at par in 2019. Bonds from the $298.8 million series of various-purpose GO bonds, which were sold at a TIC of 4.43%, mature from 2017 through 2032, with a term bond in 2034. They are callable at par in 2019. Bonds from the $64.9 million series of GO bonds, which were sold at a TIC of 3.00%, mature from 2010 through 2016 and are not callable. None of the bonds were formally re-offered. The credit is rated Aa1 by Moody's, AA-plus by Standard & Poor's, and AA by Fitch.
Trading activity in the secondary market was light to moderate, and tax-exempt yields were lower by one or two basis points.
"We're a bit firmer again," a trader in New York said. "The market has just had a fairly strong tone to it the last week or so. There's a bit more activity in the secondary than there was the last couple days, but that's to be expected because Friday and Monday are always quieter days, but things are picking up now. We're probably better a basis point or two across the board."
The Treasury market showed some losses yesterday. The yield on the benchmark 10-year note, which opened at 3.35%, finished at 3.48%. The yield on the two-year note finished at 0.95% after opening at 0.90%. The yield on the 30-year bond, which opened at 4.23%, finished at 4.38%.
As of Monday's close, the triple-A muni scale in 10 years was at 88.9% of comparable Treasuries, according to Municipal Market Data. Additionally, 30-year munis were 107.8% of comparable Treasuries. Also, as of the close Monday, 30-year tax-exempt triple-A general obligation bonds were at 114.6% of the comparable London Interbank Offered Rate.
In economic data released yesterday, retail sales climbed 0.6% in June, after a 0.5% uptick the previous month. Economists polled by Thomson Reuters had predicted a 0.4% rise. Excluding autos, retail sales rose 0.3% in June, after a revised 0.4% climb the previous month.
The producer price index rose 1.8% in June, after a 0.2% climb the previous month. Economists polled by Thomson Reuters had predicted a 0.9% uptick. The PPI core climbed 0.5% in June, after a 0.1% drop the prior month.
