The Port Authority of New York and New Jersey yesterday sold what appears to be the first issue of 100-year municipal bonds -- at least in this century.
"If Disney and Coca-Cola can do it, why can't they," said a source at Dillon Read & Co., which acted as sole underwriter on the $100 million deal.
Disney and Coca-Cola each issued 100-year bonds last year. A third corporate issuer, ABN Amro, also issued a 100-year bond last year.
"As far as I know, no municipal issuer has ever done this before," said Barry Weintrob, the authority's chief financial officer.
One municipal analyst said while he is not a historian, "it could very well be" that the Port Authority made municipal history with the 100-year deal.
The Dillon Read source, however, said he believed New York City may have sold some century bonds in the 1800s.
The Port Authority decided to sell the 100-year bond to lock in today's interest rates, Weintrob said. "We certainly are excited about it."
The Dillon Read source said the offering got a good reception and was sold to eight to 10 funds and investment advisers. He cited the authority's "solid" credit and the Port Authority's assets, such as tunnels and bridges.
"The physical plant of the Port Authority is certainly going to be here 100 years from now," he said.
The offering consisted of a single June 1, 2094 maturity with a 6 1/8% coupon and a 6.28% yield to maturity. The bonds are callable June 1, 2024 at par. The deal is all sold, the Dillon Read source said.
In other activity yesterday, dollar bonds ended 3/4 to 7/8 points higher while yields on high-grade issues fell five basis points to more in spots.
Yesterday's September MOB spread was negative 379, compared to negative 382 on Friday. In debt futures, the September municipal contract closed up nearly 3/4 point to 93 19/32s.
Traders yesterday cited a strong Treasury market and thin supply.
"You're talking about a very thirsty market at this point," one municipal trader said, adding that this week's calendar offers little to quench it.
"Last week, you had the shortened week so there wasn't much supply, and this week the calendar is light also," another trader said.
"The sentiment seems to be that if you own bonds you're a god, and if you don't you're a spectator," a third municipal trader said.
Demand is particularly strong for New York paper, he said.
"People are dying for it," he said.
Another trader noted that New York plans to sell between $2.8 billion and $3.2 billion of state, city or agency paper in the second quarter but so far has sent only a tiny amount to market.
"The street is ready to roll," he said, "It's just a matter of getting the state to pass the budget."
Even if that debt all comes to market in the next few weeks, it would be "readily and easily absorbed by the street" which craves New York supply, he said. The trader cited the roughly $29 billion of overall debt being called or maturing between June 1 and July 1.
For instance, the trader said he purchased some New York State Medicare 5.70% bonds of 2029 on Friday at 6.32%. When he purchased more of the same issue yesterday, they were trading at 6.15% -- a 17 basis point difference. He noted however that the first purchase was made Friday morning when the market was lower.
Shifting to the buyside, Frank Lucibella, a second vice president at John Hancock Mutual funds, said he is pursuing some upcoming high-yield issues. Apart from that, however, "We're fully invested and we are just kind of sitting tight here," Lucibella said.
Lucibella said he's looking at three or four high-yield offerings expected in the coming weeks as a way to "lock in some yield." He declined to name those offerings. Lucibella said he sees little of value in the secondary market.
That market "has been pretty much picked over," he said. He cited a lack of current coupon bonds, which seem to be a favorite of retail investors, as well as premium bonds.
On the new issue front, a Paine-Webber Inc. group is expected to sell $300 million of Massachusetts special obligation revenue bonds today. Market expectations call for a maximum yield of 6.05% on the offering.
Also today, a Kidder, Peabody & Co. group is expected to bring to market $279 million of Pennsylvania Convention Center bonds.
In other news, dealer inventories took another tumble yesterday as Standard & Poor's Corp's The Blue List fell $48 million to $1.53 billion from $1.58 billion on Friday. In the past three business days, The Blue List has dropped about $206 million. The list has not not been lower since May 22 when it was $1.48 billion."
