Municipals weaken as large deals hit market; Texas Transportation ups deal to $1.83 billion

By Sheri Kasprzak

New York, Jan. 21 – Municipals weakened on the session with yields on long bonds climbing by as much as 5 basis points, market insiders said, as Treasuries sank.

Yields were higher by 3 bps to 5 bps as Treasury yields rose by 5 bps at 10 years and 30 years.

Meanwhile, the largest deals of the week hit the market, with the Texas Transportation Commission upsizing its Central Texas Turnpike System revenue bonds to $1,827,880,000 from $1.75 billion.

Deal conducted in four parts

The Texas offering included $225 million of series 2015A first-tier refunding put bonds (A3/A-/A-), $199,135,000 of series 2015B first-tier revenue refunding bonds (A3/A-/A-), $240 million of series 2015B capital appreciation bonds (A3/A-/A-) and $1,163,745,000 of series 2015C second-tier revenue refunding bonds (Baa1/BBB+/BBB).

The bonds were sold through Barclays and J.P. Morgan Securities LLC.

The 2015A bonds are due Aug. 15, 2042 and have a 5% coupon to yield 1.62%.

The 2015B first-tier bonds are due 2032 and 2037 with 5% coupons.

The 2015B capital appreciation bonds are due 2036 to 2037 with 0% coupons.

The 2015C bonds are due 2022 to 2034 with term bonds due in 2037 and 2042. The serial bonds have 5% coupons. The 2037 bonds have a 5% coupon priced at 112.41, and the 2042 bonds have a 5% coupon priced at 111.979.

Proceeds will be used to refund the commission’s series 2002A and 2012A-B revenue bonds.

Washington brings G.O.s

The second-largest offering of the week came from the State of Washington, which sold $999.26 million of series 2015 general obligation bonds through competitive bid.

The deal included $281.75 million of series 2015B various purpose G.O. bonds, $200.63 million of series 2015C motor vehicle tax G.O. bonds, $58.12 million of series 2015T-2 taxable bonds and $458.76 million of series R-2015E various purpose G.O. refunding bonds.

The 2015B bonds are due 2022 to 2040 with 5% coupons and yields from 1.65% to 2.84%.

The 2015C bonds are due 2016 to 2040 with 5% coupons.

The 2015T-2 bonds are due 2016 to 2022 with 0.3% to 2.19% coupons, all priced at par.

The R-2015E bonds are due 2015 and 2018 to 2033 with 5% coupons.

Winning bidders named

The bonds (Aa1/AA+/AA+) were sold competitively. Morgan Stanley & Co. LLC won the series 2015B bonds at a 3.37% true interest cost. BofA Merrill Lynch took the 2015C bonds at a 3.26% TIC. Wells Fargo Bank, NA took the 2015T-2 bonds at a 1.58% TIC, and BofA Merrill Lynch took the R-2015E bonds at a 2.67% TIC.

Proceeds will be used to finance state capital projects and refund existing G.O. debt.

“We issued four series of bonds this morning, all four through competitive sales,” said Ellen Evans, debt manager for the state, in an interview.

“While the state is not required to sell bonds in competitive sales, we have found that this sales mechanism has tended to produce the lowest cost of funds for the state.”

Alabama highway deal upsized

Elsewhere during the session, the Alabama Federal Aid Highway Finance Authority hit the market with $524,245,000 of series 2015 special obligation revenue bonds. The deal was upsized from $508,475,000.

The bonds (Aa1/AAA/) were sold through Morgan Stanley & Co. LLC and Joe Jolly & Co.

The bonds are due 2016 to 2034 with 3% to 5% coupons.

Proceeds will be used to finance road, bridge and highway improvements.

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