Yields Lowered on Deals as Traders See `Paradigm Shift’
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.