Over $1.3 billion in major new deals were priced yesterday as the week's primary market moved into gear, while participants reported a reversion to weakness in the secondary, particularly at the long end.
Leading the fray in new issues, Barclays Capital priced $428 million of new-money and refunding bonds for the University of Pittsburgh. Bonds from the $143.1 million refunding series mature from 2010 through 2022, with yields ranging from 1.10% with a 2.5% coupon in 2010 to 4.59% with a 4.25% coupon in 2022.
Bonds from the $285 million new-money series mature in 2012, and from 2014 through 2024, with term bonds in 2028 and 2031. Yields range from 2.32% with a 5% coupon in 2012 to 5.10% with a 5% coupon in 2031. All the bonds are callable at par in 2019, and are rated Aa2 by Moody's Investors Service and AA by Standard & Poor's.
Pennsylvania competitively sold $300 million of general obligation bonds to JPMorgan at a true interest cost of 4.21%. The bonds mature from 2010 through 2029, yielding 1.62% with a 5% coupon in 2012. Bonds maturing in 2010 will be decided via sealed bid. None of the other bonds were formally re-offered. The bonds, which are callable at par in 2019, are rated Aa2 by Moody's and AA by Standard & Poor's and Fitch Ratings.
In the secondary, a softer complexion returned after ending unchanged yesterday, with tax-exempt yields rising by one or two basis points.
"We've been pretty flat the last couple of days, but there's a weaker tone back in the market again today," a trader in New York said.
Traders said higher yields reflected more of the consistent weakness seen over the last couple of weeks, which had been interrupted by a couple of sideways sessions.
"There's a bit of weakness back in the market, more so on the long end than anywhere else on the curve," a trader said. "Probably down a basis point or two overall, though we're still largely flat on the short end."
"Bonds are cheapening up a bit again," a trader in Los Angeles said. "I think it could be supply-driven today. But we're off a good basis point or two, maybe even a little more on the very long end."
The Treasury market showed losses yesterday. The yield on the benchmark 10-year note, which opened at 2.86%, finished at 2.99%. The yield on the two-year note was quoted near the end of the session at 1.02% after opening at 0.95%. The yield on the 30-year bond, which opened at 3.56%, was quoted near the end of the session at 3.71%.
As of Monday's close, the triple-A 10-year maturity was at 130.4% of comparable Treasuries, according to Municipal Market Data. Additionally, 30-year munis were 134.7% of comparable Treasuries. Also, as of the close Monday, 30-year tax-exempt triple-A rated GOs were at 148.8% of the comparable London Interbank Offered Rate.
Elsewhere in the new-issue market yesterday, Morgan Stanley priced $287.7 million of water system revenue bonds for the California Department of Water Resources. The bonds mature from 2009 through 2026, with term bonds in 2028, 2029, and 2032. Yields range from 1.20% with a 2% coupon in 2010 to 5.00% priced at par in 2032. Bonds maturing in 2009 will be decided via sealed bid. The bonds, which are callable at par in 2018, are rated Aa2 by Moody's and AAA by Standard & Poor's.
The Texas A&M University Board of Regents competitively sold just over $219 million of permanent university fund bonds in two series. Barclays Capital won the larger $153.5 million Series A with a TIC of 4.85%. The bonds mature from 2019 through 2031, with a term bond in 2034. Yields range from 3.60% with a 5% coupon in 2019 to 5.00% with a 5.5% coupon in 2031. Bonds maturing in 2020, 2021, 2023, 2024, 2026, 2028, and 2034 were not formally re-offered.
BMO Capital Markets won the smaller $65.6 million Series B with a TIC of 4.76%. Those bonds mature from 2010 through 2029, with term bonds in 2031 and 2034. None of the bonds were formally re-offered. All the bonds are callable at par in 2015. The credit is rated triple-A by all three major ratings agencies.
Morgan Stanley priced $109.5 million of pollution control revenue refunding bonds for the Maryland Economic Development Corp. The bonds mature in 2022, and are priced at par to yield 6.20%. The bonds, which are callable at par in 2019, are rated Baa1 by Moody's, BBB-plus by Standard & Poor's, and A by Fitch.
Morgan Stanley also priced $74.3 million of higher educational revenue bonds for Ohio. The bonds mature from 2009 through 2019, with term bonds in 2024, 2029, and 2036. Yields range from 1.00% with a 4% coupon in 2009 to 5.75% with a 5.5% coupon in 2036. The bonds, which are callable at par in 2018, are rated A2 by Moody's and A by Standard & Poor's.
Merrill Lynch & Co. priced $72.4 million of tax-exempt and taxable bonds for the Rhode Island Convention Center Authority. Bonds from the $71.9 million tax-exempt Series A mature from 2011 through 2019, with term bonds in 2023, 2025, and 2027. Yields range from 2.40% with a 3% coupon in 2011 to 5.75% with a 5.5% coupon in 2027. These bonds are callable at par in 2019, and are insured by Assured Guaranty Corp. The deal also contains a $500,000 taxable series, which matures in 2014. The underlying credit is rated A1 by Moody's, AA-minus by Standard & Poor's, and A-plus by Fitch.
In economic data released yesterday, merchant wholesalers posted a 0.7% decrease in inventories in January, while sales dropped 2.9% in the month. Inventories of merchant wholesalers slid to $424.2 billion, following a revised 1.5% decrease to $427.3 billion in December.
Meanwhile, sales of merchant wholesalers slid to about $326.1 billion, following December's revised 3.7% decrease to $335.7 billion. Economists polled by Thomson Reuters predicted a 1.0% decrease in wholesale inventories.
