The Connecticut Housing Finance Authority reported strong retail demand in its oversubscribed $150 million sale of Series 2015A housing mortgage finance program bonds.
Bank of America Merrill Lynch was lead manager.
The authority received $110 million of retail orders during the Feb 9-10 sale and more than $230 million of institutional orders on the second day, said vice president for finance Hazim Taib. CHFA chose not to accelerate the sale to one-day only, partly to accommodate some Connecticut investors who could not put in orders due to a blizzard that pummeled New England and forced many offices to close.
CHFA also overcame market headwinds stemming from problems surrounding Greece and Puerto Rico and discussion over the U.S. economy, Taib said. Leading into the pricing, Treasuries swung drastically with the 10-year rising to 1.95% on Feb. 6 from 1.68% on Feb 2. It settled around 2% on Feb. 10.
The authority sold 28% of the tax-exempt bonds as serials and the remainder as term bonds. It structured about 24% of those term bonds was structured as a planned amortization class.
Orders allowed CHFA to reduce the rate between 5 and 10 basis points on the majority of the bonds, depending upon the maturity.
"Credit spread continues to be a challenge for us especially at the tail end of the curve. As an issuer, while we want the lowest rate possible," said Taib. "We also need to recognize the dynamics of the sale along with the supply and demand in a potential rising interest rate environment. Based on what we had to face, I would say we accomplished what we set out to do."
By comparison, said Taib, the Series 2014F 10-year maturity spread to Municipal Market Data was 65 while the 20-year maturity was 82. The 2015A 10 year maturity spread was 68 while the 20-year was 95.
Moody's Investors Service and Standard & Poor's assign triple-A ratings to CHFA, both with stable outlooks.
