Municipals end softer as largest deal of week prices; North Texas Tollway sells $866.5 million

By Sheri Kasprzak

New York, April 8 – Municipals were a touch weaker Wednesday, said traders, as the week’s largest offering met with solid demand.

Yields were higher by 1 to 2 basis points across the curve, said a trader in the afternoon. Meanwhile, Treasuries also weakened with the 10-year note yield rising by 3 bps and the five-year yield also up by 3 bps. The 30-year bond yield rose by 1 bp.

Elsewhere in the market, new issuance for the first quarter totaled about $103 billion, the highest level since the first quarter of 2010, according to Alan Schankel, managing director with Janney Montgomery Scott LLC.

Refundings dominated the first three months. In fact, refundings climbed by 172% over the first quarter of 2014.

“New money issuance fell 8%, so although top-line volume is heavy, the amount of municipal bonds outstanding continues to shrink since new funding issuance is usually offset by redemption of the issue being refunded,” Schankel said Wednesday.

“Notably, given the high total volume, bond insurance penetration continues to expand, accounting for 5.7% of 1Q new-issue volume, compared to 3.5% in 2013 and 5.6% in 2014.”

North Texas drives deal

Heading up Wednesday’s new issuance, the North Texas Tollway Authority hit the open road with its $866,545,000 of series 2015A system second tier revenue refunding bonds.

The bonds (A3/BBB+/) were sold through senior managers J.P. Morgan Securities LLC and Loop Capital Markets LLC.

The bonds are due 2016 to 2035 with a term bond due in 2038, said a term sheet. The serial coupons range from 2% to 5%. The 2038 bonds have a 4% coupon that priced at 98.965 and a 5% coupon that priced at 121.225.

Proceeds will be used to refund the authority’s series 2008F system second tier revenue refunding bonds.

North Carolina bonds upsized

Another major deal from the day came from North Carolina, which priced $231.36 million of series 2015A general obligation bonds. The deal was upsized from $225 million.

The bonds (Aaa/AAA/AAA) were sold competitively.

The bonds are due 2016 to 2035 with 3% to 5% coupons and 0.25% to 3.00% yields.

Proceeds will be used to construct, equip and acquire capital improvements within the state.

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