W.Va. negotiated deal prices as state upsizes competitive offerings

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The municipal bond market saw more deals hit the screens, as West Virginia sold a negotiated deal on Tuesday and prepared to offer two competitive sales on Wednesday.

A New York trader said the secondary market continued to be lifeless in the backdrop of a thriving new-issue market. “The secondary market is extremely quiet, flat, and uneventful,” the trader said on Tuesday an hour before the market closed.

Primary market
On Tuesday, Bank of America Merrill Lynch priced West Virginia’s $167 million of Series 2018A general obligation state road bonds. The deal was restructured from the originally expected $312 million. On Wednesday, the state will competitively sell two deals, increasing the total offering to $632.4 million. The sale was originally one deal amounting to $488.21 million.

The state will be selling $302.055 million of Series 2018B Bidding Group 2 GO state road bonds and $330.345 million of Series 2018B Bidding Group 1 GO state road bonds.

The deals are rated Aa2 by Moody’s, AA-minus by S&P and AA by Fitch.

"The restructuring was done because we think it will save the state money," said Ann Urling, Deputy Chief of Staff to Gov. Jim Justice. "We believe it will result in a lower cost to the state."

Also on Tuesday, BAML priced and repriced the Regents of the University of California’s $962.36 million of Series 2018AZ general revenue bonds after holding a one-day retail order period.

Although the New York trader said his firm was not involved in the deal, he heard it went very well and stole the attention of supply-hungry investors who have suffered through the scarcity of volume so far in 2018.

“All the new-issue focus is on the Cal deal,” he said, adding that investors have “lots of cash out there.” He said those who didn’t participate this week are waiting until after the long Memorial Day holiday — closer to the upcoming June 1 coupon and maturity date — to spend that available cash on reinvestment paper.

“They are looking for paper, but it’s very thin,” the trader said of 2018’s overall new-issue volume. Weekly issuance hit $10 billion for the first time this year in the five days through Friday.

BAML is also set to price the Regents' $739 million of Series 20180 limited project revenue bonds, the $283 million of Series 2018BA taxable general revenue bonds, and $95 million of Series 2018P taxable limited project revenue bonds.

The Series AZ bonds and Series BA taxables are rated Aa2 by Moody’s Investors Service and AA by S&P Global Ratings and Fitch Ratings while the Series 0 bonds and Series P taxables are rated Aa3 by Moody’s and AA-minus by S&P and Fitch.

Since 2008 the Regents have sold about $24.74 billion of securities, with the most issuance occurring in 2013 when it sold $4.70 billion and the least in 2008 when it sold $572 million.
BAML priced and repriced the Phoenix Civic Improvement Corp.’s $219.595 million of Series 2018A wastewater system revenue bonds junior lien and Series 2018B wastewater system revenue refunding bonds senior lien bonds.

The Series 2018A bonds are rated Aa2 by Moody’s and AA-plus by S&P while the Series 2018B bonds are rated AA2 by Moody’s and AAA by S&P.

Additionally, BAML priced the Northampton County, Pennsylvania, General Purpose Authority’s $150 million of Series 2018A fixed-rate and Series 2018B variable-rate hospital revenue bonds for St. Luke’s University Health Network.

The deal is rated A3 by Moody’s and A-minus by S&P.

Citigroup priced and repriced the Katy Independent School District, Texas’ $186.23 million of Series 2018 unlimited tax school building bonds.

The deal is backed by the Permanent School Fund guarantee program, and is rated triple-A by Moody’s and S&P.

Tuesday’s bond sales
Click here for the Regents’ $962M repricing

Click here for the Regents’ $962M pricing

Click here for the Regents’ $945M deal

West Virginia:
Click here for the final pricing

Click here for the state repricing

Click here for the state sale

Click here for the Phoenix CIC repricing

Click here for the Phoenix CIC deal

Click here for the Northampton repricing

Click here for the Northampton County deal

Click here for the Katy ISD deal

Bond Buyer 30-day visible supply at $7.52B
The Bond Buyer's 30-day visible supply calendar decreased $2.43 billion to $7.52 billion on Wednesday. The total is comprised of $3.91 billion of competitive sales and $3.61 billion of negotiated deals.

Secondary market
Municipal bonds were little changed on Tuesday, according to a late read of the MBIS benchmark scale.

Benchmark muni yields rose less than a basis point in the one - to nine-year and 11-30-year maturities and were unchanged in the 10-year maturity.

High-grade munis were also weaker, with yields calculated on MBIS’ AAA scale rising less than a basis point in the one- to 30-year maturities.

According to Municipal Market Data’s AAA benchmark scale, municipals were unchanged on Tuesday with yields steady in the 10-year general obligation muni and flat in the 30-year muni maturity.

Treasury bonds were little changed as stocks were trading mixed.

On Tuesday, the 10-year muni-to-Treasury ratio was calculated at 83.2% while the 30-year muni-to-Treasury ratio stood at 95.7%, according to MMD. The muni-to-Treasury ratio compares the yield of tax-exempt municipal bonds with the yield of taxable U.S. Treasuries with comparable maturities. If the muni/Treasury ratio is above 100%, munis are yielding more than Treasuries; if it is below 100%, munis are yielding less.

Previous session's activity
The Municipal Securities Rulemaking Board reported 35,852 trades on Monday on volume of $6.27 billion.

California, Texas and New York were the states with the most trades, with the Golden State taking 16.079% of the market, the Lone Star State taking 9.846% and the Empire State taking 9.643%.

Treasury sells $45B 4-week bills
The Treasury Department Tuesday auctioned $45 billion of four-week bills at a 1.720% high yield, a price of 99.866222.

The coupon equivalent was 1.746%. The bid-to-cover ratio was 3.10.

Tenders at the high rate were allotted 52.90%. The median rate was 1.690%. The low rate was 1.650%.

Treasury auctions $26B one-year bills
The Treasury Department Tuesday auctioned $26 billion of year bills at a 2.275% high yield, a price of 97.699722.

The coupon equivalent was 2.347%. The bid-to-cover ratio was 3.68.

Tenders at the high rate were allotted 37.67%. The median rate was 2.260%. The low rate was 2.230%.

Treasury auctions $33B two-year notes
The Treasury Department Tuesday auctioned $33 billion of two-year 2 ½% notes at a 2.590% high yield, a price of 99.825680.

The bid-to-cover ratio was 2.88.

Tenders at the high rate were allotted 79.53%. The median rate was 2.560%. The low rate was 2.200%.

Data appearing in this article from Municipal Bond Information Services, including the MBIS municipal bond index, is available on The Bond Buyer Data Workstation. Click here for a brief tour of the Workstation, or contact Vanessa Kim at 212-803-8474 for more information.

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Primary bond market Higher education bonds Infrastructure Secondary bond market State of West Virginia State of California Regents of The University of California State of New York State of Texas Phoenix Civic Improvement Corporation