UPDATE: Port Auth Of NY&NJ Receives No Bids For $300 Million Notes
The bi-state agency, which manages bridges, tunnels, airports and transit in New York City and northern New Jersey, said the lack of bids will have "no impact" on current Port Authority capital projects since the failed sale was held well in advance of the need for capital funds.
Nonetheless, the lack of bids for the three-year securities, which have the highest short-term ratings from Moody's Investors Service, Standard & Poor's and Fitch Ratings, represents a poignant demonstration of the illiquidity troubling the $2.7 trillion municipal bond market. Traditional large buyers have all but vanished, as some dealers have already closed their books for the year, and as remaining buyers seek only the cream of the crop in highly rated bonds.
A new-issue calendar, which at $21.2 billion is around the heaviest its has been so far this year for the next 30 days, is going to have trouble pushing its way into the market in this environment, even as some deals offer extremely handsome returns. In an anomaly, the tax-exempt portion of the market this year has offered far greater returns than those available on U.S. Treasury securities, sending yield differentials between those two markets to all-time highs.
The Port Authority was one of the first municipal bond issuers to run into trouble when dealers who sold so-called auction-rate securities refused to support the auctions, stopping investors in these specialized bonds from being able to easily liquidate them and imposing sharp penalties on issuers for not being able to find buyers. Interest rates on port bonds jumped to 20% from 4.3% in an auction held in February until it was able to convert the bonds to another format.
The authority said its credit ratings and financial health "remain strong" and that it plans to return to the market within the upcoming year, when it is "confident that markets will recover."
The agency's longer-term bonds are rated "Aa3" by Moody's Investors Service and "AA"-minus by Standard & Poor's and Fitch Ratings. In a market that's had a virtual ratings wedge driven into it, investors haven't wanted to touch anything less than solid double-A or triple-A credits, and even "Aa3" or "AA"-minus debt isn't thought of as solid double-A since at the bottom of a three-rung municipal double-A ratings ladder.
Wednesday generally saw hard times for pricing new tax-exempt bonds, which had to be brought more cheaply than normal as measured by their yield differential to triple-A-rated tax-exempts. Some issues also had be scaled back in size to fit investor orders and to leave underwriters in a position where they weren't stocking unwanted bonds.
Among lesser-rated issues, a downsized $204 million Lower Colorado River Auth, Texas issue saw its longest 2037 yield raised to 6.80% from 6.50% Tuesday. A University of Chicago deal was trimmed to $315 million. And a solid double-A $140 million Virginia Public Building Authority issue, which historically trades at yield spreads no wider than the teens against triple-A munis, offered yields as cheap as 22 to 27 basis points more in the 10-to-20-year range, according to analysts at Thomson Reuters.
Port Authority bonds showed no reaction to the failed note sale, traders said. -By Stan Rosenberg, Dow Jones Newswires, 201-938-2143; stan.rosenberg@dowjones.com Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: http://www.djnewsplus.com/al?rnd=DhiqXiPFgwaKAmv0bXc80w%3D%3D. You can use this link on the day this article is published and the following day.
(END) Dow Jones Newswires
December 03, 2008 16:20 ET (21:20 GMT)
Publié le 03 Décembre 2008 Copyright © 2008 Dowjones
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