Top rated municipal bonds ended stronger on Wednesday, traders said, as more supply swept into the marketplace, led by issuers in Chicago, California and Oregon.
PNC Capital Markets priced Chicago's $505 million sale of second lien water revenue bonds.
The $60.75 million of Series 2016A-1 tax-exempts were priced to yield from 2.55% with a 5% coupon in 2023 to 3.25% with a 5% coupon in 2031.
The $334.58 million of Series 2004 second lien water revenue refunding bonds were priced as a remarketing as 5s to yield from 1.59% in 2018 to 3.04% in 2027. A 2017 maturity was offered as a sealed bid.
The $100 million of Series 2000 second lien water revenue refunding bonds were priced as a remarketing as 5s to yield from 3.10% in 2028 to 3.19% in 2030.
The issue is rated A by S&P Global Ratings and AA by Fitch Ratings and Kroll Bond Rating Agency.
Since 2006, Chicago has issued about $24 billion of debt, with the largest issuance occurring in 2015 when the city sold $4.24 billion of securities. The Windy City offered the lowest amount of bonds in 2009 when it sold $777.9 million.
Bank of America Merrill Lynch priced and repriced the Alameda Corridor Transportation Authority, Calif.'s $601 million of Series 2016 A&B tax-exempt subordinate and second subordinate lien revenue refunding bonds to lower yields by as much as 18 basis points.
The $30.7 million of Series 2016A subordinate lien revenue refunding bonds were repriced to yield from 1.34% with a 5% coupon in 2021 to 1.99% with a 5% coupon in 2025. The $570 million of Series 2016B second subordinate lien revenue refunding bonds were repriced to yield from 2.81% with a 5% coupon and 3.11% with a 3% coupon in a split 2034 maturity to 2.92% with a 5% coupon, 3.07% with a 4% coupon and 2.77% with a 5% coupon in a triple split 2037 maturity.
The Series A bonds are rated Baa2 by Moody's Investors Service and BBB-plus by S&P and Fitch. The Series B bonds are rated Baa2 by Moody's and BBB by S&P and Fitch -- except for half of the 2034 split maturity, both parts of the 2035 split maturity, two parts of the 2036 triple split maturity and two parts of the 2037 triple split maturity, which are insured by Assured Guaranty and rated A2 by Moody's and AA by S&P. Assured insured a total of $180 million of the deal.
"The deal was very popular and with the great support we received from Bank of America Merrill Lynch as the underwriters, Public Financial Management as the financial advisor and Assured, we were 23 times oversubscribed and maintained a healthy spread. I am pleased it worked out for everyone involved," said James P. Preusch, chief financial officer of ACTA. "Sometimes you fall into the luck of the draw and there was some of that today but with the expertise we had we did quite well with establishing pricing and there is also the fact that the tax-exemption in California is very powerful."
Preusch also noted that this deal was designed to do a better job of matching the anticipated revenue with the debt service.
Morgan Stanley priced and repriced the state of Oregon's $336 million of Series 2016 D, E, F, G and H Article XI-M seismic projects and Article XI-Q state projects general obligation bonds on Wednesday.
The $66.9 million of Series 2016D Article XI-Q bonds were priced to yield from 0.56% with a 2% coupon in 2017 to 2.34% with a 5% coupon in 2036; a 2041 maturity was priced as 5s to yield 2.44%. The $181.19 million of Series 2016F Article XI-Q bonds were priced to yield from 0.80% with a 2% coupon in 2019 to 2.34% with a 5% coupon in 2036; a 2039 maturity was priced as 5s to yield 2.44%. The $46.8 million of Series 2016G Article XI-Q bonds were priced to yield from 0.73% with a 3% coupon in 2018 to 2.22% with a 5% coupon in 2034.
The $41.16 million of Series 2016H Article XI-M bonds were priced to yield from 0.57% with a 2% coupon in 2017 to 2.34% with a 5% coupon in 2036. The $15.06 million of Article XI-Q taxable GOs were priced at par to yield from 0.73% in 2017 to 3.093% in 2031. All series are rated Aa1 by Moody's and AA-plus by S&P and Fitch.
According to Laura Lockwood-McCall, director of the debt management division for the Oregon state Treasury, the sale went very well and the state was able to tighten spreads to both Treasuries for the taxable bonds and to MDD in certain maturities.
"We went in to the market on a good day and got terrific rates on our bonds, at some of the tightest spread to market indices that we've seen historically, so we are happy campers," she said.
Although the Treasury department is still in the process of purchasing its escrow securities and doesn't have official numbers as of press time, the state expects a minimum of $28 million in savings.
"About a month ago, we were estimating PV savings in the $16 million range, so the overall drop in rates over the past month has worked out well for us. Of course, there is also about $120 million in new money associated with today's sale, so we're glad to lock in these low rates on that portion of the transaction, too," she said.
Since 2006, the state of Oregon has sold about $4.27 billion of bonds including the current issue, with the largest issuance occurring in 2013 when it offered $719 million of debt. The Beaver State sold the least amount of debt in 2009 when it issued $107 million of bonds.
Loop Capital Markets priced the Los Angeles International Airport's $289.21 million of Series 2016A subordinate revenue bonds, subject to the alternative minimum tax. The issue was priced to yield from 90.67% with a 5% coupon in 2017 to 2.98% with a 4% coupon in 2036; a 2042 maturity was priced as 5s to yield 2.89%. The deal is rated A1 by Moody's and AA-minus by S&P and Fitch.
BAML priced the New Jersey Higher Education Student Assistance Authority's $190 million of Series 2016-1 student loan revenue bonds, subject to the AMT. The $180 million of Series 2016-1A senior bonds were priced to yield from 1.32% with a 5% coupon in 2017 to 3.62% with a 3.5% coupon in 2032; a 2039 maturity was priced as 4s to yield 3.81%. The $10 million of Series 2016-1B subordinate bonds were priced as 4s to yield 4.05% in a 2046 bullet maturity.
The senior bonds are rated Aa2 by Moody's and AA by S&P while the subordinate bonds are rated A2 by Moody's and A by S&P.
JPMorgan Securities priced the Dormitory of the State of New York's $157.27 million of Series 2016A revenue bonds for the NYU Hospitals Center. The DASNY issue was priced to yield from 0.73% with a 5% coupon in 2017 to 3.07% with a 3% coupon in 2036; a 2040 maturity was priced as 4s to yield 3.04%. The bonds are rated A2 by Moody's and A-minus by S&P and Fitch.
JPMorgan also priced the North Carolina Medical Care Commission's $169.66 million of healthcare facilities revenue refunding bonds for the Duke University Health System. The deal was priced to yield from 0.62% with a 5% coupon in 2017 to 2.12% with a 5% coupon in 2028. The bonds are rated Aa2 by Moody's and AA by S&P and Fitch.
Secondary Market
The yield on the 10-year benchmark muni general obligation fell three basis points to 1.53% from 1.56% on Tuesday, while the 30-year muni yield dropped three basis points to 2.45% from 2.48%, according to the final read of Municipal Market Data's triple-A scale.
U.S. Treasuries were narrowly mixed on Wednesday. The yield on the two-year Treasury was unchanged from 0.72% on Tuesday, while the 10-year Treasury yield fell to 1.73% from 1.76% and the yield on the 30-year Treasury bond decreased to 2.57% from 2.61%.
The 10-year muni to Treasury ratio was calculated at 88.3% on Wednesday compared with 88.8% on Tuesday, while the 30-year muni to Treasury ratio stood at 95.0% versus 95.0%, according to MMD.
Requests for New Muni CUSIPs Rose in April
Demand for new municipal CUSIP identifiers rose 1% in March, the third straight monthly increase, CUSIP Global Services said in a report released on Wednesday.
A total of 1,443 new municipal bond identifier requests were made in April, up from 1,430 in March. On a year-over-year basis, however, April municipal bond identifier requests were down by 7%.
Long-term muni note CUSIP orders inched up to 26 in April, compared to 25 requests in March. Short-term note muni CUSIP volume fell to 83 in April from 91 in March.
The report tracks requests by issuers for bond identifiers as an early indicator of new volume and suggests a resurgence of municipal issuance in the next several weeks.
"While we are still off some of the highs reached in the first part of last year, the recent trend in CUSIP request volume has been indicative of a healthy market for new debt issuance," Gerard Faulkner, Director of Operations for CUSIP Global Services, said in a press release.
Regionally, municipal bond issuers in Texas requested the highest volume of new identifiers in April, accounting for 189 CUSIP requests. In the first four months of this year, Texas issuers accounted for the most CUSIP requests at 611, or 11%, of total volume. New York State was second with 392 municipal CUSIP orders.
"As long as the interest rate environment continues to favor debt issuance, we expect to see this trend toward steady increases month-to-month volume continuing," Richard Peterson, Senior Director of S&P Global Market Intelligence, said in the release.
