Yields cut on some new deals as municipal bonds strengthen
The first of the week's new issuance rolled in on Tuesday as strengthening municipal bond prices allowed underwriters to cut yields on some of the day’s larger deals.
“We‘re in the middle of what I’d call a ‘paradigm shift,’ where market psychology is changing fairly dramatically with respect to duration,” said one New York trader.
The yield on the 10-year benchmark muni general obligation fell four basis points to 1.92% from 1.96% on Monday, while the 30-year GO yield dropped eight basis points to 2.60% from 2.68%, according to the final read of Municipal Market Data's triple-A scale.
“The market has finally woken up and recognized that the MMD curve was too steep and is now in the process of adjusting that,” the New York trader said.
“It definitely has to do with the assessment that the tax bill may (likely) lead to a reduction in supply,” he added, “But it also has as much to do with last week’s Fed minutes and the choice of [Jerome] Powell to replace [Janet] Yellen [as head of the Federal Reserve].”
U.S. Treasuries were mixed on Tuesday. The yield on the two-year Treasury rose to 1.64% from 1.61%, the 10-year Treasury yield dipped to 2.31% from 2.32% and yield on the 30-year Treasury dropped to 2.77% from 2.79%.
Goldman Sachs priced and repriced the Salt River Project Agricultural Improvement and Power District, Ariz.’s $739.61 million of Series 2017A electric system revenue bonds to lower yields by as much as 10 basis points in some maturities.
The issue was repriced as 5s to yield from 1.24% in 2021 to 2.62% in 2039. The deal is rated Aa1 by Moody’s Investors Service and AA by S&P Global Ratings.
Since 2008, the district has issued about $5.67 billion of debt with the most issuance occurring in 2009 when it sold $1.04 billion. It did not come to market in 2013 or 2014.
Siebert Cisneros Shank priced for retail the New York Triborough Bridge and Tunnel Authority’s $528.02 million of Series 2017C general revenue refunding bonds for MTA bridges and tunnels.
The issue was priced for retail to yield from 1.62% with a 5% coupon in 2023 to 2.26% with a 5% coupon in 2028.
The deal is rated Aa3 by Moody’s and AA-minus by S&P and Fitch Ratings.
Citigroup priced and repriced Broward County, Fla.’s $290.33 million of Series 2017 airport system revenue bonds subject to the alternative minimum tax to lower yields on most maturities.
The issue was repriced as 5s to yield from 1.46% in 2020 to 2.93% in 2037, 3.00% in 2042 and 3.04% in 2047. The deal is rated A1 by Moody’s and A-plus by S&P.
Bank of America Merrill Lynch priced and repriced the Connecticut Health and Educational Facilities Authority $135.07 million of tax-exempt Series I-1 revenue bonds and $26.06 million of Series I-2 taxable revenue bonds for Sacred Heart University.
The tax-exempts were repriced as 5s to yield from 1.12% in 2018 to 3.03% in 2037 and 3.08% in 2042. The taxables were priced at par to yield from 1.793% in 2018 to 3.357% in 2028. The deal is rated A3 by Moody’s and A by S&P.
JPMorgan Securities priced the Board of Regents of the University of Texas System’s $302.64 million of Series 2017A permanent university fund taxable bonds.
The issue was priced at par to yield 3.376% in 2047, about 60 basis points over the comparable Treasury security. The average life is 29.139 years. The deal is rated triple-A by Moody’s, S&P and Fitch.
Piper Jaffray priced the Southwestern Community College District, San Diego County, Calif.’s $140 million of Series A Election of 2016 general obligation bonds.
The issue was priced to yield from 0.99% with a 3% coupon in 2019 to 3.26% with a 3.125% coupon in 2040. A 2042 maturity was priced as 4s to yield 3.06% and a 2047 maturity was priced as 4s to yield 3.11%. The deal is rated Aa2 by Moody’s and AA-minus by S&P.
BAML priced the South Dakota Housing Development Authority’s $125 million of Series 2017D homeownership mortgage non-AMT bonds.
The issue was priced at par to yield from 0.95% and 1.05% in a split 2018 maturity to 2.70% in 2028, 3.10% in 2032, 3.375% in 2037 and 3.50% in 2040. A planned amortization class bond was priced as 4s to yield 2.07% in 2047 with an average life of 5 years. The deal is eared triple-A by Moody’s and S&P.
BAML priced California’s $100 million of Series 2012A general obligation refunding bonds as a remarketing. The SIFMA Index floating rate bonds were priced at par to yield 25 basis points above the SIFMA rate in 2033 with a mandatory redemption date of 2021. BAML also priced California’s $100 million of Series 2013D GO refunding bonds as a remarketing. The SIFMA Index floating rate bonds were priced at par to yield 29 basis points above the SIFMA rate in 2028 with a mandatory redemption date of 2020. The deals are rated Aa3 by Moody’s and AA-minus by S&P and Fitch.
In the competitive arena, the Florida Board of Education sold $239.71 million of Series 2017A lottery revenue refunding bonds.
Wells Fargo Securities won the bonds with a true interest cost of 1.861%. The issue was priced as 5s to yield from 1.20% in 2019 to 2.16% in 2028. The deal is rated A1 by Moody’s, AAA by S&P and AA by Fitch.
The Virginia College Building Authority sold $138.39 million of educational facilities revenue bonds, public higher education financing program, and taxable bonds in two separate sales. Citi won the $113.05 million of Series 2017A tax-exempts with a TIC of 2.6838%. The issue was priced to yield from 1.03% with a 5% coupon in 2018 to 3.15% with a 3% coupon in 2037. Janney won the $24.89 million of Series 2017B taxables with a TIC of 3.0968%. The deals are rated Aa1 by Moody’s, AA by S&P and AA-plus by Fitch.
The County Commissioners of Charles County, Md., sold $102.18 million of consolidated public improvement and refunding bonds of 2017.
BAML won the bonds with a TIC of 2.1426%. The issue was priced to yield from 1% with a 5% coupon in 2018 to 3.15% with a 3% coupon in 2037. A 2042 maturity was priced as 3 1/8s to yield 3.28% while a 2047 maturity was priced as 3 1/4s to yield 3.36%. The deal is rated triple-A by Moody’s, S&P and Fitch.
On Tuesday, the 10-year muni-to-Treasury ratio was calculated at 83.3% compared with 84.6% on Monday, while the 30-year muni-to-Treasury ratio stood at 93.9% versus 95.8%, according to MMD.
AP-MBIS 10-year muni at 2.243%, 30-year at 2.781%
The Associated Press-MBIS municipal non-callable 5% GO benchmark scale was stronger in late trade.
The 10-year muni benchmark yield fell to 2.243% from 2.285% from the final read on Monday, according to Municipal Bond Information Services, a national consortium of municipal interdealer brokers. The AP-MBIS 30-year benchmark muni yield declined to 2.781% from 2.840%.
The AP-MBIS benchmark index is a yield curve built on market data aggregated from MBIS member firms and is updated hourly on the Bond Buyer Data Workstation.
MSRB: Previous session's activity
The Municipal Securities Rulemaking Board reported 34,871 trades on Monday on volume of $8.56 billion.
Data appearing in this article from Municipal Bond Information Services, including the AP-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.