Municipals close stronger despite weak Treasuries; Massachusetts authority brings $738 million

By Sheri Kasprzak

New York, Nov. 18 – Municipal prices ended the session higher even as Treasuries got knocked down by the Federal Open Market Committee’s October minutes, which hinted at a December rate hike, market sources said.

Yields on top-rated municipals fell by as much as 4 basis points, said a trader in the late afternoon.

Muni prices rose even as Treasuries prices fell. Weakness was particularly seen in shorter maturities, which are more susceptible to interest rate movements.

The 10-year benchmark note yield rose by 2 bps to close at 2.27%, the five-year note yield rose by 3 bps to 1.69%, the two-year yield rose by 4 bps to 0.90%, and the 30-year bond yield held steady at 3.04%.

Massachusetts school bonds

Among the week’s larger deals, the Massachusetts School Building Authority priced $738,405,000 of series 2015C dedicated sales tax refunding bonds. The deal was upsized from $718 million.

The bonds (Aa2/AA+/AA+) were sold through BofA Merrill Lynch.

The bonds are due 2016 and 2018 to 2037 with 2% to 5% coupons and yields from 0.25% to 3.75%, according to a term sheet.

The bonds were repriced lower at 10 years with the 5% coupon ending 3 bps lower at 2.31%.

Proceeds will be used to refund existing debt.

N.J. Transportation sells debt

Elsewhere, the New Jersey Transportation Trust Fund priced $626.8 million of series 2015AA transportation program bonds.

The bonds (A3/A-/A-) were sold through senior manager RBC Capital Markets LLC.

The bonds are due 2017 to 2035 with term bonds due in 2038, 2041 and 2046. The serial coupons range from 3% to 5% with yields from 2.32% to 4.80%. The 2038 bonds have a 4.75% coupon and priced at 98.232 to yield 4.88%, and the 2041 bonds have a 5.25% coupon and priced at 102.485 to yield 4.92%. The 2046 bonds have a 5% coupon that priced at 99.844 to yield 5.01% and a 5.1% coupon that priced at 99.842 to yield 5.01%.

The 10-year maturity for those bonds also saw the yield lowered by 3 bps to a final yield of 4.14%, much higher than Massachusetts’ 10-year yield, reflecting the appropriation-backed nature of the bonds and New Jersey’s fiscal troubles, said a market source familiar with the deal Wednesday.

Proceeds will be used to finance transportation projects within the state.

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