The municipal market weakened yesterday, following the Treasury market, and the week's largest scheduled new-issue transaction was postponed.
Goldman, Sachs & Co. yesterday delayed a planned $1.5 billion sale of senior-secured bonds for Florida's Citizens Property InsuranceCorp. Sources at Goldman said that the deal is now listed as day-to-day, but declined to elaborate on why the deal was postponed. They did note, however, that a press release would be forthcoming.
The bonds will be structured on the short end of the market with maturities available in 2011, 2012, and 2013. Part of the deal will be insured by Financial Security Assurance Inc. The bonds have underlying ratings of A2 by Moody's Investors Service and A-plus by Standard & Poor's.
Overall yesterday, traders said tax-exempt yields were higher by five or six basis points, with more weakness on the long end.
"The market is not feeling well," a trader in Chicago said. "It's kind of interesting because we have so much rollover at the start of the month. I don't think the secondary market is overloaded."
The trader said that the market's recent weakness is, "in the long run, probably a good thing."
"It can't keep going up," he said. "Just hope you're hedged or stayed light."
Trades reported by the Municipal Securities Rulemaking Board yesterday showed losses. Bonds from an interdealer trade of California Health Facilities Financing Authority 5s of 2038 yielded 5.15%, up six points from Wednesday. A dealer sold to a customer Ohio Tobacco Settlement Financing Authority 5.75s of 2034 at 6.82%, up two basis points from where they traded Wednesday. Bonds from an interdealer trade of California 5s yielded 5.06%, up five basis points from where they traded Wednesday.
"The market doesn't feel so good," a trader in New York added. "Everybody is showing me offerings, and everyone's posting bids, but not really close to my offer."
The Treasury market showed losses yesterday. The yield on the benchmark 10-year Treasury note, which opened at 4.01%, finished at 4.09%. The yield on the two-year note was quoted near the end of the session at 2.70%, after opening at 2.65%.
Elsewhere in the new-issue market yesterday, Goldman Sachs priced $520.5 million of electric revenue refunding bonds for the Sacramento Municipal Utility District. Bonds mature from 2013 through 2028, with yields ranging from 3.07% with a 3% coupon in 2013 to 4.73% with a 5% coupon in 2028. Bonds from 2013 to 2027 are insured by FSA, with 2028 bonds uninsured. The bonds are callable at par in 2018. The underlying credit is rated A1 by Moody's, A by Standard & Poor's, and A by Fitch Ratings.
Lehman Brothers priced $428.9 million of senior-lien airport revenue bonds for the Phoenix Civic ImprovementCorp. in four series, some of which are subject to the alternative minimum tax. Bonds from the $206.6 million Series A, which are not subject to the AMT, mature from 2020 through 2028, with term bonds in 2033 and 2038. Yields range from 4.45% with a 5% coupon in 2019 to 5.07% with a 5% coupon in 2038.
Bonds from the $43.2 million Series B, which are subject to the AMT, mature 2012 through 2019. Yields range from 4.15% with a 5% coupon in 2012 to 4.87% with a 5.25% coupon in 2019. Bonds from the non-AMT, $110.2 million Series C mature 2009 through 2022, with yields ranging from 2.73% on a 3% coupon in 2010 to 4.61% on a 4.5% coupon in 2022. Bonds maturing in 2009 will be decided via a sealed bid. Bonds from the AMT-subject, $68.9 million Series D mature 2009 through 2020, with yields ranging from 3.6% on a 5% coupon in 2010 to 4.97% on a 5% coupon in 2020. Bonds maturing in 2009 will be decided via a sealed bid. All series are callable in 2018 and are rated Aa3 by Moody's and AA-minus by Standard & Poor's.
Merrill Lynch & Co. priced $218.5 million of bonds for Detroit in multiple series, some of which are taxable. Bonds from the tax-exempt $59.1 million, general obligation Series A mature 2014 from 2022, with term bonds in 2024 and 2028. Yields on the bonds range from 3.85% on a 5% coupon in 2014 to 4.93% on a 5% coupon in 2028. The bonds are callable in 2018.
Bonds from the tax-exempt $79.7 million, GO refunding Series B mature 2009 through 2018, with yields ranging from 1.9% on a 5% coupon in 2009 to 4.36% on a 5% coupon in 2018. Bonds from the tax-exempt $49.7 million Series A1 of GO capital improvement mature in 2013, 2015, and 2016, with yields ranging from 4.59% on a 5% coupon in 2013 to 5% on a 5% coupon in 2016. The pricing also included Series A2, comprised of $25 million of taxable GO capital improvement bonds maturing in 2014, and Series C, $5.1 million taxable GO refunding debt maturing in 2009.
Series A, B and C are insured by Assured Guaranty Corp. Moody's yesterday dropped its underlying rating on the GO unlimited tax bonds to Baa3, while Standard & Poor's and Fitch rate the debt BBB. Series A1 and A2, the limited tax GOs, are uninsured and were dropped to the junk-level Ba1 by Moody's yesterday and are rated BBB-minus by Standard & Poor's, and BBB by Fitch.
Duluth, Minn.'s Independent School District No. 709 competitively sold $111.4 million of full-term certificates of participation to Piper Jaffray & Co, with a true interest cost of 4.43%. The bonds mature 2009 to 2026, with a term bond in 2028. Bonds maturing 2023 through 2026 and the term bond in 2028 were not re-offered. The bonds, which are callable at par in 2019, are rated Aa2 by Moody's and AAA by Standard Poor's.
Morgan Stanley priced $80.1 million of hospital revenue bonds for the Orange County, Fla., Health Facilities Authority for the benefit of the Orlando Regional Healthcare System. The deal is comprised of a $24.4 million term bond maturing in 2034 and a $55.7 million term bond maturing 2041. The yield on the 2034 term bond is 5.42% with a coupon of 5.25%, and the yield on the 2041 term bond is 5.49% with a 5.375% coupon. The bonds, which are callable at par in 2018, are rated A2 by Moody's, A by Standard & Poor's, and A by Fitch.
California's Sequoia Union High School District competitively sold $75 million of GOs to Piper Jaffray with a TIC of 4.4798%. The bonds mature 2009 to 2030, with a term bond in 2032. Bonds maturing in 2012, 2017, 2019, 2020, and 2023 through 2029 were not formally re-offered. The bonds, which are callable at 101% in 2017 and par in 2018, are rated Aa2 by Moody's.
Depfa First Albany Securities LLC priced $53.6 million of tax-exempt and taxable revenue bonds for the Dormitory Authority of the State of New York. Bonds from the $53.5 million series mature 2011 through 2028, with term bonds in 2033 and 2038. Yields range from 3% with a 3.5% coupon in 2011 to 4.92% with a 5% coupon in 2038. The bonds are callable at par in 2018. The deal also contains an $85,000 taxable component, which matures in 2011. The credit is rated A3 by Moody's and A-minus by Fitch.
In economic data released yesterday, the preliminary first-quarter gross domestic product rose 0.9%, compared to the 0.6% rise seen in the previous reading for the quarter. Economists polled by IFR Markets had predicted a 1.0% gain.
Initial jobless claims for the week ended May 24 came in at 372,000, after a revised 368,000 the previous week. Economists polled by IFR had predicted 370,000 initial jobless claims.
Also, continuing jobless claims for the week ended May 17 came in at 3.104 million, after a revised 3.068 million the previous week. Economists polled by IFR had predicted 3.085 million continuing jobless claims.