Munis end with firmer tone as week’s largest deal prices; Utah Transit brings $843.25 million

By Sheri Kasprzak

New York, Jan. 27 – Municipals were steady to slightly firmer Tuesday, following in line with Treasuries, market insiders said.

Yields on the short end were seen somewhat firmer with the rest of the curve holding steady, said a trader in the afternoon.

Over in the Treasuries market, the 30-year bond and 10-year note yields were flat at 2.40% and 1.83%, respectively. Early in the session, the 30-year yield hit a record low of 2.33%. The five-year note yield fell by 2 basis points to 1.34%.

The market was pushed in part by declining durable goods orders for the month of December.

Spread between AAA, BBB falls

Meanwhile, the spread between yields of 10-year triple-A and triple-B tax-free bonds has fallen to below 100 bps, the narrowest since 2008, said Alan Schankel, managing director with Janney Montgomery Scott LLC.

“Near record-low yields across all fixed-income securities are pushing many investors to accept either lower credit quality or longer duration to maximize yield,” Schankel wrote Tuesday.

“We caution investors to consider the risk-reward balance when stretching for yield by accepting lower credit quality.”

Looking to specific issuers, Pennsylvania (Aa3/AA-/AA-) yields are 33 bps higher than the triple-A index while New Jersey (A1/A/A) yields are 60 bps over the index and Illinois (A3/A-/A-) yields are 140 bps higher.

Utah Transit brings debt

Heading up the day’s pricing action, the Utah Transit Authority hit the market Tuesday with $843,245,000 of series 2015 revenue refunding bonds.

The deal included $660,435,000 of series 2015A sales tax revenue refunding bonds and $182.81 million of series 2015A subordinated sales tax revenue refunding bonds, said a pricing sheet.

The 2015A sales tax bonds are due 2020 to 2036 with a term bond due in 2038. The serial coupons range from 2% to 5%. The 2038 bonds have a 5% coupon and priced at 119.572.

The 2015A subordinated bonds are due 2020 to 2035 with a term bond due in 2037. The serial coupons range from 3% to 5%. The 2037 bonds have a 5% coupon and priced at 116.359.

The bonds (Aa2) were sold through senior manager Morgan Stanley & Co. LLC.

Proceeds will be used to refund the authority’s series 2007A, 2008A, 2009A and 2012A revenue bonds initially issued for capital projects.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.