Prices of top-quality municipal bonds finished weaker on Wednesday, traders said, as a bevy of new offerings sold, topped by the biggest deal of the week — the North Texas Tollway Authority's $866.52 million of revenue bonds.
Primary Market
JPMorgan priced the Tollway's Series 2015A system second tier revenue refunding bonds to yield from 0.43% with a 2% coupon in 2016 to 3.58% with a 5% coupon in 2035. A 2038 term bond was priced as 4s to yield 4.07%. The deal is rated A3 by Moody's Investors Service and BBB-plus by Standard & Poor's.
The Tollway Authority has more than $1 billion of second-tier and $6.3 billion of first-tier bonds outstanding. Since 1997, the authority has sold a total of almost $13 billion of revenue bonds. The largest issuances were in 2008 and 2009 when $5.19 billion and $1.77 billion were sold, respectively. No bonds were sold in 1992, 2000-2002, 2004, 2006-2007 or 2013.
Morgan Stanley priced the New York State Dormitory's $682.73 million of Series 2015A revenue bonds for retail investors. The DASNY deal was priced to yield from 0.70% with a 3% coupon in 2017 to 3.00% with a 5% coupon in 2035. A 2038 term bond was priced as 4s to yield 3.47%; a 2041 term bond was priced at par with to yield 2.50%; a 2045 term bond was priced as 5s to yield 3.15% and a 4048 term bond was priced as 5s to yield 3.32%. The 2016 maturity was offered as a sealed bid. The NYU bonds are rated Aa3 by Moody's and AA-minus by S&P.
Citi priced the Tennessee state School Bond Authority's $383.63 million of Series 2015B higher education facilities second program bonds. The issue was priced as 5s to yield from 0.79% in 2017 to 3.01% in 2035. A 2040 term bond was prices as 5s to yield 3.13% and a 2045 term was priced as 5s to yield 3.18%; a 2016 maturity was offered as a sealed bid. The issue is rated Aa1 by Moody's, AA by S&P and AA-plus by Fitch.
In another Texas deal, Piper Jaffray priced the Lone Star College System's $232.33 million deal for Harris, Montgomery and San Jacinto counties. The $134.87 million Series 2015A of limited tax general obligation bonds were priced to yield from 1.45% with a 4% coupon in 2020 to 3.04% with a 5% coupon in 2037; a 2040 term bond was priced as 5s to yield 3.09%. The $97.46 million of Series 2015B limited tax GO refunding bonds were priced to yield from 1.45% in a split maturity in 2020 with 2% and 5% coupons to 2.71% with a 4% coupon in 2027. The deal is rated triple-A by S&P.
Goldman Sachs priced Jackson, Tenn.'s $204.74 million Series 2015 hospital revenue refunding bonds for the Jackson-Madison County General Hospital. The issue was priced to yield from 0.47% with a 2% coupon in 2016 to 3.58% with a 5% coupon in 2036; a 2041 term was priced as 4s to yield 4.125%. The issue is rated A1 by Moody's and A-plus by S&P.
Goldman also priced the Philadelphia Redevelopment Authority's $111.21 million of City Service Agreement revenue refunding bonds. The $72.88 million Non-AMT Series 2015A bonds were priced as 5s to yield from 3.08% in 2027 to 3.39% in 2031. The $38.33 million AMT Series 2015B bonds were prices as 5s to yield from 1.04% in 2017 to 3.31% in 2027. The issue is rated A2 by Moody's, A-plus by S&P and A-minus by Fitch.
In the competitive arena, North Carolina sold $231.36 million of general obligation bonds. Wells Fargo won the deal with a true interest cost of 2.5954%. The bonds were priced as 5s to yield from 0.25% in 2016 to 2.05% in 2026 and to yield from 2.70% with a 3.25% coupon in 2028 to 3.00% with a 4% coupon in 2035. The deal is rated triple-A by Moody's, S&P and Fitch Ratings. North Carolina last sold bonds on April 16, 2014, when Morgan Stanley won $206.69 million of Series 2014A GO refunding bonds with a TIC of 1.8035%.
Bank of America Merrill Lynch won the bidding war for Howard County, Md.'s $178.42 million of Series 2015A GO consolidated public improvement project and refunding bonds with a TIC of 2.6606%. The bonds are priced to yield from 0.19% with a 5% coupon in 2016 to 3.05% with a 4% coupon in 2035. The deal is rated triple-A by Moody's, S&P and Fitch.
PREPA Bonds Trading Higher
The Puerto Rico Electric Power Authority moved higher on a report it will submit a plan to creditors in the next two months to restore its finances. Chief restructuring officer Lisa Donahue made the comment in an interview with Reorg Research, Bloomberg reported.
Last month, The Bond Buyer reported that PREPA's forbearing bondholders made offer they said would avoid expected cash defaults. The bondholders offered $2 billion in financing for additional capital investments, according to a statement from their public relations firm.
PREPA has more than $8.3 billion in power revenue bonds outstanding. Any default on these bonds would be the biggest monetary default on municipal bonds in United States history.
Markit noted that some PREPA bonds were trading in the 61 to 62 price range on Wednesday.
"PREPA bonds have seen some positive movement over the past month," according to a Markit Analyst.
"Two of the major catalysts for this have been the $2 billion offer from its lenders and a recent report that the authority will submit a plan in the coming months to get the troubled agency back on track, the Markit analyst said. "Before this week, non-insured PREPA bonds have not been valued above 60 since June of 2014."
Secondary Market
Prices of top-quality munis closed lower. The yield on the 10-year benchmark muni general obligation rose two basis points to 1.94% from 1.92% on Tuesday , while the yield on 30-year GO was up by one basis point to 2.81% from 2.80%, according to the final read of MMD's triple-A scale.
"Municipal bond yields are relatively flat to modestly higher amid a backdrop of very light secondary trading," Interactive Data reported in its daily report.
Treasury prices were lower on Wednesday. The yield on the two-year Treasury note rose to 0.53%, from 0.52% on Tuesday, while the 10-year yield increased to 1.90% from 1.89% and the 30-year yield rose to 2.53% from 2.52%.
The 10-year muni to Treasury ratio was calculated at 102.4% on Wednesday versus 101.5% on Tuesday, while the 30-year muni to Treasury ratio stood at 111.6% compared to 110.8%.
