Munis end with little reaction to QE end; retail investors thin; pricing action stays light

By Cristal Cody

Tupelo, Miss., Oct. 29 – Municipal bonds traded mostly flat following the Federal Reserve’s monetary policy announcement, market sources said on Wednesday.

“Maybe a touch weaker, but there’s been no change,” a trader said in the late afternoon. “There doesn’t seem to be a lot of retail out there, and that’s keeping people from stocking bonds. It just seems like the little money that’s out there is content to sit on the sidelines and wait for higher rates.”

Treasuries showed more reaction and closed weaker on the short end of the bond curve after the Federal Reserve announced plans to end the government’s quantitative easing program by the end of the month.

The 10-year Treasury note yield jumped 3.9 basis points to 2.323%, and the 5-year note yield climbed 9.5 bps to 1.597%. The 30-year bond yield ended stronger, down 0.9 bps at 3.048%.

Muni primary action has been light over the week, with the exception of a large offering from New York Liberty Development Corp., a source said.

New York Liberty Development priced $1.63 billion of series 2014 3 World Trade Center revenue bonds. Final pricing details were not available by press time.

The offering was made only to qualified institutional buyers under Rule 144A.

The deal included $1.08 billion of class 1 bonds due Nov. 15, 2044, $300 million of class 2 bonds due Nov. 15, 2041 and $250 million of class 3 bonds due Nov. 15, 2044.

The bonds were sold on a negotiated basis with Goldman Sachs & Co. and J.P. Morgan Securities LLC as the senior managers.

Proceeds will be used to finance the completion and construction of Tower 3 of the World Trade Center.

North Texas Tollway to price

Coming up in primary activity, North Texas Tollway Authority plans to offer $499,535,000 of series 2014 system revenue refunding bonds, according to a preliminary official statement.

The deal includes $350,475,000 of series 2014A first tier bonds (A2/A-/) and $149.06 million of series 2014B second tier bonds (A3/BBB+/).

The series 2014A bonds have serial maturities from 2019 through 2025, and the series 2014B bonds are due 2030 and 2031.

BofA Merrill Lynch and Barclays are the lead managers of the negotiated sale.

Proceeds will be used to refund a portion of the authority’s series 2008A North Texas Tollway Authority system first tier current interest revenue refunding bonds and a portion of the outstanding series 2008F second tier revenue refunding bonds and to fund a debt service reserve fund.

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