Yields Low­ered on Deals as Traders See `Par­a­digm Shift’

The Bond Buyer - - Market News - By Chip Bar­nett & aaron Weitz­man

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 twoyear 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.

Newspapers in English

Newspapers from USA

© PressReader. All rights reserved.