Municipal bonds ended mixed on Monday, according to traders, as the New York City Transitional Finance Authority’s $1 billion of building aid revenue bonds were priced for retail investors and the Chicago Public Schools came to market with an unrated bond deal.
The week’s action kicked off when Bank of America Merrill Lynch priced the NYC TFA’s $1.01 billion of Fiscal 2018 Series S-1 and S-2 building aid revenue bonds for retail investors. The underwriters will hold a second retail order period on Tuesday ahead of the institutional pricing on Wednesday.
The $805.68 million of Series S-1 BARBs were priced to yield from 1.14% with a 5% coupon in 2019 to 2.38% with a 5% coupon in 2027, 3.10% with a 3% coupon in 2031, 3.04% with a 5% coupon in 2035 and 3.37% with a 4% coupon in 2036. No retail orders were taken in the 2028-2030 or 2032-2034 maturities.
The $200.49 million of Series S-2 BARBs were priced to yield from 0.94% with a 2% coupon in 2018 to 2.54% with a 5% coupon in 2028, 2.74% with a 5% coupon in 2030, 3.04% with a 5% coupon in 2035 and 3.07% with a 5% coupon in 2036. No retail orders were taken in the 2029 or 2031-2034 maturities.
The deal is rated Aa2 by Moody’s Investors Service and AA by S&P Global Ratings and Fitch Ratings.
JPMorgan Securities priced the Chicago Board of Education’s $500 million of unlimited tax dedicated revenues general obligation bonds. The deal was doubled in size from the originally planned $250 million.
“I am not surprised about how little chatter there has been about the pricing of this deal,” said one New York trader. “With the high yield guys coming in and the fact that no one wants to show their hand about who is buying and who is selling when it comes to Illinois credit.”
The $285 million of Series 2017A GOs were priced in a 2046 bullet as 7s to yield 7.75% while the $215 million of Series 2017B GO refunding bonds were priced as 6 3/4s to yield 7.25% in 2030 and as 7s to yield 7.60% in 2042.
The deal is unrated.
The trader said that perhaps CPS has a little bit of firmer footing than they would have had a few weeks ago, but they must have had the deal done going into the pricing.
“You don’t bring a deal like this in this environment without having everything spoken for prior to,” he said.
On Tuesday, BAML is expected to price Los Angeles’ $320 million of subordinate revenue bonds for the Los Angeles International Airport consisting of Series 2017A bonds, subject to the alternative minimum tax, and Series 2017B non-AMT bonds.
The deal is rated A1 by Moody’s and AA-minus by S&P and Fitch.
JPMorgan Securities is expected to price the Aldine Independent School District, Texas’ $378.54 million of Series 2017A unlimited tax school building and refunding bonds.
The deal is rated triple-A by Moody’s and S&P.
Citigroup is set to price Philadelphia’s $348 million of Series 2017 general obligation bonds on Tuesday.
The deal is rated A2 by Moody’s, A-plus by S&P and A-minus by Fitch.
In the competitive arena Tuesday, the Lewisville Independent School District, Texas, is selling $202.53 million of Series 2017 unlimited tax school building GOs.
The deal, which is backed by the Permanent School Fund guarantee program, is rated AAA by S&P and Fitch.
Also on Tuesday, the South Carolina Transportation Infrastructure Bank is selling $188.62 million of Series 2017A revenue refunding bonds.
The deal is rated A1 by Moody’s and A by Fitch.
The yield on the 10-year benchmark muni general obligation was unchanged from 2.05% on Friday, while the 30-year GO yield increased one basis point to 2.86% from 2.85%, according to the final read of Municipal Market Data's triple-A scale.
Treasuries were stronger on Monday. The yield on the two-year Treasury dropped to 1.37% from 1.40% on Friday, the 10-year Treasury yield declined to 2.37% from 2.39% and the yield on the 30-year Treasury bond decreased to 2.92% from 2.93%.
The 10-year muni to Treasury ratio was calculated at 86.5% on Monday, compared with 85.7% on Friday, while the 30-year muni to Treasury ratio stood at 97.8% versus 97.1%, according to MMD.
MSRB: Previous session's activity
The Municipal Securities Rulemaking Board reported 39,221 trades on Friday on volume of $7.25 billion.
Prior week's actively traded issues
Revenue bonds comprised 53.98% of new issuance in the week ended July 7, down from 54.22% in the previous week, according to Markit. General obligation bonds comprised 39.71% of total issuance, down from 39.79%, while taxable bonds made up 6.31%, up from 5.99%.
Some of the most actively traded bonds by type were from California, Pennsylvania and Illinois issuers.
In the GO bond sector, the California 6.5s of 2033 were traded 30 times. In the revenue bond sector, the Allentown Neighborhood Improvement Zone Development Authority, Pa., 5s of 2042 were traded 42 times. And in the taxable bond sector, the Illinois 5.1s of 2033 were traded 60 times.