More mega deals on tap in primary, including NYC GOs, Washington BABs refunding


The municipal primary market was active Tuesday while triple-A scales were little moved despite U.S. Treasury gains ahead of the Federal Open Market Committee meeting conclusion Wednesday.

Various large new-issues were well-received and cleared the market Tuesday, with several repricing to lower yields.

Despite several larger deals entering the primary, the large amounts of cash on hand has yet to push munis cheaper amid UST volatility.

“As we have maintained over the last two weeks, the seasonally weak month of March is likely to end up being a red herring given that investors have sufficient cash to put to work,” noted Vikram Rai, head of municipal markets strategy at Wells Fargo, in a report. “Thus, we expect spreads and ratios to remain steady as long as the hawkish risk from the FOMC remains in check.”

“Municipals retain exceptional demand despite another Fed-based selloff in Treasuries, muni richness versus USTs, imminent tax season and inconsistent fund flows and backpedaling banks,” Municipal Market Analytics, Inc. partner Matt Fabian wrote in the firm’s Outlook.

Some of this stems from the “perhaps accelerating ownership rotation in favor of individuals and others through separately managed account vehicles where investors aim at maximizing laddered income.”

Ratios have barely budged. The two-year muni-to-Treasury ratio Tuesday was at 59%, the three-year at 57%, the five-year at 57%, the 10-year at 57% and the 30-year at 82%, according to Refinitiv Municipal Market Data’s 3 p.m. EST read. ICE Data Services had the two-year at 60%, the three-year at 58%, the five-year at 57%, the 10-year at 58% and the 30-year at 80% at 3:30 p.m.

“Ever-richer muni to UST ratios disappoint mean reversionists — nominal yields and income are too attractive on an after-tax basis,” Fabian said.

The forward calendar grows with more billion dollar-plus deals on tap. The Bond Buyer 30-day visible supply sits at $7.05 billion, but that includes New York City’s $1.45 billion of tax-exempt fixed-rate general obligation bonds coming next week.

Washington also has plans to issue $1.083 billion of motor fuel tax and vehicle related fees refunding revenue bonds that will refund some of its outstanding Build America Bonds.

The state posted its preliminary official statement Monday that includes extraordinary redemption provision language despite reports from Bloomberg News that some investors sent letters earlier this month to the state asking officials to reconsider the deal.

Other investors had sent letters to the Regents of the University of California, which came to market earlier this month with $1.1 billion of general revenue bonds, a portion of the proceeds refunded its BABs debt priced in 2009 and 2010.

The bond counsel on that deal argued issuers have the right to trigger the ERP due to sequestration.

The continual cuts to BABs subsidies over more than a decade has issuers less inclined to trust federal programs that include similar legislative programs and have led to a number of issuers contemplating refunding their outstanding BABs.

In the primary market Tuesday, Jefferies priced and repriced with small changes from the preliminary pricing $1.273 billion of climate bond certified transportation revenue refunding green bonds for the New York Metropolitan Transportation Authority (A3/A-/AA/AA/), with 5s of 11/2028 at 2.78% (-1), 5s of 2029 at 2.82%, 5s of 2034 at 3.02% (+1), 5s of 2039 at 3.43% (+1), 5s of 2044 at 3.95%, 4s of 2048 at 4.28% (-2) (BAM insured), and 5.25s of 11/2049 at 4.20%, callable 5/15/2034.

J.P. Morgan priced and repriced for the New Jersey Turnpike Authority (A1///) $500 million of turnpike revenue bonds, Series 2024 B, with two to eight basis point bumps: 5s of 1/2044 at 3.65% (-6), 5.25s of 2049 at 3.93% (-2), 4.125s of 2054 at 4.30% (-8) and 5.25s of 2054 at 3.98% (-8), callable 1/1/2034.

BofA Securities priced for the Northampton County General Purpose Authority (A3/A-//) $319.35 million of St. Luke’s University Health Network Project hospital revenue bonds, with 5s of 8/2025 at 3.17%, 5s of 2029 at 2.88%, 5s of 2034 at 3.00%, 5s of 2039 at 3.37%, 5s of 2044 at 3.94%, 5s of 2049 at 4.06%, 5.25s of 2053 at 4.25% and 5.25s of 2053 at 4.10%, callable 8/15/2034. Maturities 2035-2043, 2049 and 2053 Assured Guaranty insured.

BofA Securities priced for the Department of Water and Power of the city of Los Angeles (Aa2/AA-//AA) $275.25 million of power system revenue bonds, Series 2024 B, with 5s of 7/2036 at 2.60% and 5s of 2039 at 2.90%, callable 1/1/2034.

Wells Fargo priced and repriced for Wisconsin (/AAA/AA+/AAA/) an upsized $207.715 million of transportation revenue refunding bonds, 2024 Series 2. The deal upsized from $175 million. The repricing saw yields lowered: 5s of 7/2025 at 2.99%, 5s of 2028 at 2.58%, 5s of 2034 at 2.60% (-2) and 5s of 2037 at 2.85% (-8), callable 7/1/2034.

Wells Fargo priced for the Los Angeles County Metropolitan Transportation Authority (Aa1/AAA//) $157.415 million of Proposition A first-tier senior sales tax revenue refunding bonds, with 5s of 7/2025 at 2.68%, 5s of 2034 at 2.27% and 5s of 2042 at 3.15%, callable 7/1/2034.

In the competitive market, the Dormitory Authority of the State of New York (/AA/AA/) sold $242.195 million of City University System Consolidated Fifth General Resolution revenue bonds, Series 2024A, to Wells Fargo. Bonds mature in 7/2028 with a 5% coupon to yield 2.62%, callable 1/1/2028.

AAA scales
Refinitiv MMD’s scale was cut one to two basis points on the short end: The one-year was at 3.02% (+2) and 2.79% (+1) in two years. The five-year was at 2.45% (unch), the 10-year at 2.45% (unch) and the 30-year at 3.63% (unch) at 3 p.m.

The ICE AAA yield curve was little changed: 3.05% (unch) in 2025 and 2.83% (unch) in 2026. The five-year was at 2.50% (unch), the 10-year was at 2.49% (unch) and the 30-year was at 3.57% (unch) at 4 p.m.

The S&P Global Market Intelligence municipal curve was cut up to one basis point: The one-year was at 3.01% (+1) in 2025 and 2.79% (+1) in 2026. The five-year was at 2.48% (+1), the 10-year was at 2.47% (unch) and the 30-year yield was at 3.60% (unch), according to a 3 p.m. read.

Bloomberg BVAL was cut up to two basis points: 2.95% (unch) in 2025 and 2.80% (unch) in 2026. The five-year at 2.43% (unch), the 10-year at 2.44% (unch) and the 30-year at 3.61% (unch) at 4 p.m.

Treasuries were better.

The two-year UST was yielding 4.677% (-5), the three-year was at 4.467% (-6), the five-year at 4.297% (-6), the 10-year at 4.293% (-4), the 20-year at 4.539% (-4) and the 30-year at 4.438% (-3) at the close.

Negotiated calendar to come
The New York State Environmental Facilities Corp. (Aaa/AAA/AAA/) is set to price Thursday $722.505 million of New York City Municipal Water Finance Authority Projects — Second Resolution State Clean Water and Drinking Water Revolving Funds revenue bonds, Series 2024 A, serials 2025-2044, terms 2049, 2053. Jefferies.

The National Finance Authority (A2///) is set to price Wednesday $235.843 million of social municipal certificates, Series 2024-1 Class A, serial 2041, and Series 2024-1 Class X, serial 2041.

The New Jersey Educational Facilities Authority (A1/AA//) is set to price Thursday $160.065 million of Assured Guaranty-insured Montclair State University Issue revenue refunding bonds, Series 2024 A. Goldman Sachs.

Seguin, Texas, (/AA//) is set to price Wednesday $105.495 million of combination tax and limited pledge revenue certificates of obligation, Series 2024, serials 2025-2058. RBC Capital Markets.