Municipals close flat to weaker in longer maturities; Metro Washington Airport brings offering

By Sheri Kasprzak

New York, May 29 - Low supply kept municipals mostly unmoved on Thursday, with some weakness spotted in longer maturities thanks to a drop in Treasuries, market insiders reported.

A trader said Thursday afternoon that shorter to intermediate maturities were mostly flat as the market continued to suffer from low supply. A decline in long Treasuries shoved longer municipal yields up slightly, about 1 to 2 basis points, said the trader.

Meanwhile, after the auction of $29 billion of seven-year notes, Treasury prices fell. The 30-year bond yield rose by 3.5 bps to end the day at 3.323%, the 10-year note yield climbed by 2.5 bps to 2.463%, and the five-year note yield climbed by 2.5 bps to 1.526%.

During the session, the Treasury Department auctioned $29 billion of seven-year notes at a high yield of 2.01%. The bid/offered ratio came in at 2.6 times the amount offered, compared with a recent average of 2.56 times.

Metro Washington deal prices

Leading the day's pricing action was a $542.32 million offering of series 2014 airport system revenue and refunding bonds from the Metropolitan Washington Airport Authority.

The bonds (A1/AA-/AA-) were sold through BofA Merrill Lynch.

The bonds are due 2015 to 2034 with term bonds due in 2039 and 2044, said a pricing sheet. The serial coupons range from 2% to 5%. The 2039 bonds have a 4% coupon and priced at 98.431, and the 2044 bonds have a 5% coupon and priced at 108.682.

Proceeds will be used to finance capital improvements to the airport system and to refund existing debt.

Chicago airport bonds price

In other airport offerings, the City of Chicago repriced $769.6 million of series 2014 second-lien revenue and refunding bonds for the Chicago Midway Airport, said a market insider.

The bonds (A3/A-/A-) were sold through Barclays.

The deal included $480.57 million of series 2014A AMT bonds and $289.03 million of series 2014B non-AMT bonds.

The 2014A bonds are due 2021 to 2034 with a term bond due in 2041. The serial bonds have 5% coupons. The 2041 bonds have a 5% coupon and priced at 104.319.

The 2014B bonds are due 2019 to 2036 with 5% coupons.

The airport repriced to lower yields in most maturities with yields for 5% coupon in 10 years at 3.18% for the AMT portion and 2.85% for the non-AMT bonds, a 33 bps differential, and 4 bps and 5 bps lower than initial pricing, respectively.

Proceeds will be used to reimburse the airport for costs associated with 2004 renovations and improvements, to refund existing debt and to repay commercial paper notes.

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