There will be retail appetite for the $379.6 million New York City Municipal Water Finance Authority water and sewer system resolution revenue bonds during their retail order period on Wednesday even though retail brushed off the New York City Transition Finance Authority bonds last week, traders said.
This is because two of the bonds' four maturities available for retail order offer coupons below 4%, traders said, while the TFA bonds had higher coupons than retail typically purchases.
The 2029 maturity has a 3.25% coupon and the 2036 maturity has a coupon of 3.625%.
"I think you'll see the 29s blow out for retail first then the 36s," a trader in New York said. "If you can get 3s inside of 30 that's a win. That's where you want to be."
He said that he is confident the 29s will do very well on Wednesday and that most bonds from the deal will be in demand because the Authority's rated Aa2 by Moody's Investors Service and AA-plus by Standard & Poor's and Fitch Ratings.
Yields on the bonds ranged from 2.85% with a 5% coupon in 2028 to 3.52% with a 5% coupon in 2045.
He did say the 2045 maturity might have some problems, because retail does not like going out that far on the curve. Even though that maturity offers yield, going out that far mainly benefits the issuer because the low rate environment allows them to issue "super cheap."
"That's not something retail is going to give a [expletive] about, that's for sure," he said.
A trader in California also said retail will target the lower coupon bonds and predicted institutional might actually like the credit more than triple-A because it gives them a bit of yield, even if it's not much.
The bonds can be called at par in 2024 and Ramirez & Co. is the managing underwriter on the deal.
Primary
The tax-exempt portion of the largest deal of the week the $1 billion Hawaii general obligation deal was priced by JP Morgan on Wednesday.
The tax-exempt part totals $784.7 million with a $575 million GO part that yields from 1.25% with a 3% coupon in 2019 to 3.55% with a 3.50% coupon in 2034.
Bonds maturing in 2027, 2028, from 2029 to 2032 and a second 2034 maturity are not available for retail order.
The $209.73 GO million refunding bonds have yields from 1.25% with a 5% coupon in 2019 to 2.66% with a 5% coupon in 2026.
All the bonds can be called at par in 2024 and they are rated Aa2 by Moody's and AA by S&P and Fitch.
The $193.5 million Missouri Joint Municipal Electric Utility Commission's power project revenue bonds issued for the Plum Point Project had yields from 0.68% with a 5% coupon in 2017 to 3.55% with a 5% coupon in 2034.
Wells Fargo was the lead underwriter, and the bonds can be called in 10 years and carry ratings of A3 from Moody's and A-minus from S&P and Fitch.
For investors hungry for triple-A, $250.3 million Board of Regent of the University of Texas system revenue financing system bonds yield from 0.34% with a 2% coupon in 2016 to 3.44% with a 4% coupon in 2037.
Most bonds have an optional call in 10 years but the 2025 and the 2026 maturities do not, and the 2035 maturity has an optional call in 2019 at par.
The 2035 maturity is also a term bond with a sinking fund on it.
Morgan Stanley is the managing underwriter.
Scales
Municipal bonds' yields fell slightly on Wednesday with bonds maturing in six to 30 years strengthening by as much as two basis points, according to Municipal Market Data's triple-A scale. The rest of the curve held steady.
Treasuries also strengthened with the two-year note yield dropping by one basis point to 0.54% from Monday's market close. The 10-year fell by three basis points to 2.35% and the 30-year by two basis points to 3.07%.
