Re­tail gets first shot at NYC Waters as traders await $9.9B

The Bond Buyer - - Market News - By Chip Bar­nett

Mu­nic­i­pal bond traders saw the first of the week’s new sup­ply hit the screens on Mon­day as they watched to see how Congress was tack­ling tax re­form.

Ipreo es­ti­mates bond vol­ume for the week at $9.897 bil­lion, which con­sists of $6.644 bil­lion of ne­go­ti­ated deals and $3.253 bil­lion of com­pet­i­tive sales. In sec­ondary trad­ing, mu­nic­i­pal bonds fin­ished weaker.

Bar­clays Cap­i­tal priced the New York City Mu­nic­i­pal Wa­ter Fi­nance Au­thor­ity’s $398.12 mil­lion of Fis­cal 2018 Se­ries CC wa­ter and sewer sys­tem sec­ond gen­eral res­o­lu­tion rev­enue bonds for re­tail in­vestors ahead of the in­sti­tu­tional pric­ing on Tues­day.

The $338.44 mil­lion of Sub­series CC-1 bonds were priced as 3s to yield ap­prox­i­mately 3.103% in 2037. A triple-split 2048 ma­tu­rity was priced as 4s to yield 3.14% and as 5s to yield 2.86%; the last tranche was not of­fered to re­tail.

The $59.68 mil­lion of Sub­series CC-2 bonds were priced as 5s to yield 1.53% in a split 2024 ma­tu­rity and 1.63% in a split 2025 ma­tu­rity. The other halves of the 2034 and 2025 ma­tu­ri­ties were not of­fered to re­tail.

Pro­ceeds from the sale will be used to fund cap­i­tal projects and re­fund out­stand­ing debt, the NYC MWFA said.

The deal is rated Aa1 by Moody’s In­vestors Ser­vice and AA-plus by S&P Global Rat­ings and Fitch Rat­ings.

On Tues­day, Cit­i­group is slated to price the Metropoli­tan Pier and Ex­po­si­tion Au­thor­ity’s $475 mil­lion of McCormick Place ex­pan­sion project bonds and re­fund­ing bonds.

The is­sue is com­posed of Se­ries 2017A bonds and Se­ries 2017B and 2018A re- fund­ing bonds. The deal is rated BB-plus by S&P and BBB-mi­nus by Fitch.

JPMor­gan Se­cu­ri­ties is ex­pected to price Nor­folk, Va.’s $153.2 mil­lion of Se­ries 2017A cap­i­tal im­prove­ment bonds and Se­ries 2017B tax­able GO re­fund­ing bonds on Tues­day. The deal is rated Aa2 by Moody’s and AA-plus by S&P and Fitch.

Siebert Cis­neros Shank is set to price Tal­la­has­see, Fla.’s $115.17 mil­lion of Se­ries 2017 con­sol­i­dated util­ity sys­tems re­fund­ing bonds on Tues­day. The deal is rated AA by S&P and AA-plus by Fitch.

In the com­pet­i­tive arena, Wash­ing­ton State will sell $505.81 mil­lion of Se­ries R-2018C var­i­ous pur­pose gen­eral obli­ga­tion re­fund­ing bonds on Tues­day. The deal is rated Aa1 by Moody’s and AA-plus by S&P and Fitch.

Also on Tues­day, Wis­con­sin is set to sell $277.71 mil­lion of Se­ries 2017B GOs. The deal is rated AA by S&P and AA­plus by Fitch. The yield on the 10-year bench­mark muni gen­eral obli­ga­tion rose one ba­sis point to 1.99% from 1.98% on Fri­day, while the 30-year GO yield rose gained ba­sis point to 2.69% from 2.68%, ac­cord­ing to the fi­nal read of Mu­nic­i­pal Mar­ket Data’s triple-A scale.

U.S. Trea­suries were mixed on Mon­day. The yield on the two-year Trea­sury rose to 1.69% from 1.65%, the 10-year Trea­sury yield was un­changed from 2.40% and the yield on the 30-year Trea­sury in­creased to 2.87% from 2.88%.

“We be­lieve the fi­nal shape of tax re­form, if it ma­te­ri­al­ized could be markedly dif­fer­ent than the cur­rent pro­pos­als,” Stephen Win­ter­stein, man­ag­ing di­rec­tor at Wilm­ing­ton Trust, wrote in a Mon­day mar­ket com­ment.

“We do sup­pose how­ever, that mu­nic­i­pal yields may de­cline rel­a­tive to UST rates be­cause of the specter of a dras­tic re­duc­tion in tax-ex­empt sup­ply of [pri­vate ac­tiv­ity bonds] and ad­vanced re­fund­ings un­der the cur­rent House and Se­nate pro­pos­als for tax re­form. This fear could per­pet­u­ate that ten­dency for the time be­ing,” he wrote.

On Mon­day, the 10-year muni-to-Trea­sury ra­tio was cal­cu­lated at 80.6% com­pared with 82.6% on Fri­day, while the 30-year muni-to-Trea­sury ra­tio stood at 93.6% ver­sus 93.1%, ac­cord­ing to MMD.

The As­so­ci­ated Press-MBIS mu­nic­i­pal non-callable 5% GO bench­mark scale was weaker in late trad­ing.

The 10-year muni bench­mark yield gained to 2.292% on Mon­day from the fi­nal read of 2.272% on Fri­day, ac­cord­ing to Mu­nic­i­pal Bond In­for­ma­tion Ser­vices, a na­tional con­sor­tium of mu­nic­i­pal in­ter­dealer bro­kers. The AP-MBIS 30year bench­mark muni yield in­creased to 2.800% from 2.794%.

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.

Rev­enue bonds com­prised 55.82% of new is­suance in the week ended Nov. 10, up from 55.47% in the pre­vi­ous week, ac­cord­ing to Markit.

Gen­eral obli­ga­tion bonds made up 38.78% of to­tal is­suance, down from 38.96%, while tax­able bonds ac­counted for 5.40%, down from 5.57%.

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