The municipal market was unchanged to slightly weaker Monday as the Philadelphia Airport Authority priced for retail investors $619 million mostly backed by Assured Guaranty Municipal Corp.
The issue occurred the same day Assured was downgraded to AA-plus by Standard & Poor’s, losing its status as the last remaining triple-A bond insurer.
Tax-exempts yields showed little reaction to news of the Assured Guaranty Ltd. downgrade, remaining largely flat with some long-end weakness, according to traders. The downgrade encompasses both AGM and Assured Guaranty Corp.
“We could be down a basis point, maybe two out long, but inside of 25 or so years, we’re just flat,” a trader in Los Angeles said. “The tone is a bit sleepy. There is a good amount of people just hanging back, sitting on the sidelines waiting for the supply that is coming this week.”
Bank of America Merrill Lynch priced for retail investors $620 million of revenue bonds for the Philadelphia International Airport.
Bonds from the $267.7 million Series A mature from 2011 through 2030, with term bonds in 2035 and 2040. Yields range from 1.05% with a 2% coupon in 2011 to 4.67% in 2035. Bonds maturing from 2023 through 2025 and in 2027, 2028, 2030, and 2040 were not offered during the retail order period. Bonds from this series are backed by Assured, except bonds maturing in 2011, 2012, 2013, and 2035, which are uninsured. The bonds are callable at par in 2020.
Bonds from the $25.1 million Series B mature from 2011 through 2015, with yields ranging from 1.35% with a 4% coupon in 2012 to 2.19% with a 5% coupon in 2015. Bonds maturing in 2011 will be decided via sealed bid. The bonds are uninsured and are not callable.
Bonds from the $56.2 million Series C, which is subject to the alternative minimum tax, mature from 2011 through 2018. Bonds maturing in 2011 will be decided via sealed bid. The rest of the debt was not offered during the retail order period. The bonds are uninsured and not callable.
Bonds from the $270.3 million Series D, also subject to the AMT, mature from 2011 through 2025 with a term bond in 2028. Bonds maturing in 2011 will be decided via sealed bid. Bonds maturing from 2021 through 2023 and in 2025 and 2028 were not offered during the retail order period. Bonds from this series are backed by Assured, except bonds maturing from 2011 through 2014, which are uninsured. The bonds are callable at par in 2020.
The underlying credit is rated A2 by Moody’s Investors Service, A-plus by Standard & Poor’s, and A by Fitch Ratings.
Municipal Market Data’s triple-A scale yielded 2.39% in 10 years Monday, matching Friday, while the 20-year scale also remained flat at 3.37%. The scale for 30-year debt increased two basis points to 3.77%, up from 3.75% Friday.
Monday’s triple-A muni scale in 10 years was at 93.7% of comparable Treasuries and 30-year munis were at 96.4%, according to MMD, while 30-year tax-exempt triple-A general obligation bonds were at 106.5% of the comparable London Interbank Offered Rate.
The Treasury market was somewhat mixed Monday. The benchmark 10-year note finished at 2.56% after opening at 2.55%. The 30-year bond finished at 3.91% after opening at 3.93%. The two-year note finished at 0.37% after opening at 0.35%.
As investors continue to struggle with low absolute yields, issuers in the Northeast and California will dominate most of the primary market with relatively large financings — led by $800 million from the Bay Area Toll Authority — as part of an estimated $10.6 billion of new, long-term volume, according to Ipreo LLC and The Bond Buyer.
Last week, a revised $7.88 billion entered the market on the heels of $6.10 billion the previous week, according to Thomson Reuters. That volume is down from the high of $11.05 billion recorded during the week ended Oct. 8.
In the short-term market, a $1.1 billion GO note sale from Michigan is scheduled to be priced by Goldman, Sachs & Co. on Wednesday. Notes are not included in the estimated weekly volume. The deal is rated MIG-1 by Moody’s and SP-1-plus from Standard & Poor’s.
In the long-term market, the Bay Area Toll Authority deal will arrive as two separate series of subordinate toll bridge revenue bonds when co-senior managers Bank of America Merrill and Citi price the offering Thursday, following a retail order period on Wednesday.
The deal will be comprised of $400 million of taxable BABs maturing in 2030, 2040, and 2050, and $400 million of tax-exempt debt maturing from 2020 to 2030 with term bonds in 2040 and 2050. Both series are expected to be rated A1 by Moody’s and A-plus by Standard & Poor’s.
Northeast activity, meanwhile, will center around a $750 million sale from the New York City Transitional Finance Authority consisting of future tax-secured subordinate revenue bonds issued as fiscal 2011 Series B.
Subseries B1 will include $620 million of taxable bonds designated as BABs, while Sub-series B-3 will include $30 million of tax-exempt securities. Both series are being senior-managed and priced by Morgan Stanley and are expected to be rated Aa1 by Moody’s, and AAA by Standard & Poor’s and Fitch. Another $100 million of Sub-series B-2 consisting of traditional taxable debt will be sold competitively on Tuesday.
Connecticut will offer a hefty $700 million of special tax obligations structured as BABs and tax-exempt securities. The Citi-led deal is slated for pricing on Wednesday and is rated Aa3 by Moody’s and AA by Standard & Poor’s and Fitch. A total of $400 million will be structured as taxable bonds, while $200 million will be new-money debt and another $100 million will consist of refunding bonds.