Bonds from the Port Authority of New York and New Jersey deal priced Tuesday dominated the secondary market on Wednesday after the bonds became free to trade.
From the $400 million alternative minimum tax part of the deal the 5s in 2044 and the 5s in 2017 had a total trade amount of over $74.25 million and $24.35 million respectively, according to data provided by EMMA as of noon, EST. The 4.426s in 2034 from the taxable portion had even more trades, with its trade count coming in over $82.8 million.
A trader in New York said that the AMT and tax on the bonds "knocks out" some of his buyers, but said the deal attracted a lot of investors.
"It's the coupon structure, the bonds all have 5% coupon expect for two maturities on the short end," he said. "They priced the deal for institutional buyer."
He said the long maturities of both the AMT and taxable portions of the deal are being more actively traded than the short bonds because the deal was heavier on the long end, with $80.04 million on the 2044 maturity for the AMT section and $100.935 million on the 2034 maturity in the taxable part.
Traders told The Bond Buyer on Tuesday that they found the bonds expensive , but the trader in New York said he thinks the days of getting AMT bonds 150 basis points, 200 basis points over Treasuries is over.
"[The New York and New Jersey Port Authority] bonds were only a little cheaper than the non-AMT stuff, but investors still bought it," he said.
A trader on the west coast said besides the Port Authority bonds the secondary market has been busy. He attributed its activity to the stock market's poor performance.
"There is now strong retail interest in the municipal secondary market, the stock market got hit hard the last couple of days, a lot of interest has gone back into the bond market," he said.
Primary
The $450 million Los Angeles Department of Water and Power system revenue bonds entered their retail order on Wednesday with yields ranging from 1.09% with a 4% coupon in 2019 to 3.45% with a 4% coupon in 2039. The maturities ranging from 2030 to 2034, as well as the 2044 maturity, are not available for retail order.
The bulk of the deal, $144.175 million, is in the 2044 maturity. The bonds can be called at par in 2024 and earned ratings of Aa3 from Moody's Investors Service, and AA-minus from Standard & Poor's and Fitch Ratings.
RBC Capital Markets is the lead underwriter.
The $226.875 million Grand River Dam Authority deal was priced with yields from 0.20% with a 3% coupon in 2018 to 3.32% with a 5% coupon in 2039.
The 2028, 2029, 2034 and 2039 maturities are split so bonds are sold both with 5% coupon and coupons below 4%.
"I've seen that starting to happen more in the Texas deals too," the trader in New York said. "We've seen where there is a 5% coupon in 2018 to 2026 years, and then a 3% coupon in 2027, 2028, 2029, and then 5% again. Underwriters are trying to grasp the retail market in the 15-year range and then be done with [retail buyers] and give the rest to institutional."
The bonds can be called at par in 2024, and have sinking funds on two term bonds in 2039. The deal is rated A1 by Moody's, A-plus by S&P and A by Fitch.
The McKinney Independent School District in Collin County, Texas' $99.27 million unlimited tax school building and refunding bonds were priced to yield from 0.27% with a 5% coupon in 2016 to 3.35% with a 4% coupon in 2039. They can be called at par in 2024, and have a sinking fund on a 2039 term bond.
There is a sealed bid on the 2015 maturity.
Moody's and S&P rated the deal triple-A, and Fitch rated it Aa2 with an underlying rating of AA.
The deal was originally scheduled to total $100.5 million. BOSC is the lead underwriter.
Scales
Yields on municipal bonds rose as much as two basis points on bonds maturing in two to 13 years, according to Municipal Market Data's triple-A scale. They rose one to three basis points on bonds maturing in 14 to 23 years, and by as much as two basis points for 24- to 30-year maturities.
Treasuries strengthened on Wednesday with the two-year note's yield dropping by one basis point to 2.51% from Tuesday's market close. The 10-year fell by two basis points to 2.34% and the 30-year by one basis point to 3.05%.
