The municipal market was slightly firmer yesterday, following Treasuries.
Traders said tax-exempt yields were lower by two or three basis points.
“I’m feeling a firmer tone,” a trader in New York said. “The secondary market is kind of thin, and there seems to be more demand in the new issues. There is not a lot of follow-through, though. But there is a firmer tone.”
The Treasury market showed gains yesterday, following a speech yesterday by Federal Reserve Board chairman Ben S. Bernanke in which he suggested that more than one lowering of the federal funds target rate could be coupled with an economic stimulus package to help avert a recession. The yield on the benchmark 10-year Treasury note, which opened at 3.74%, finished at 3.61%. The yield on the two-year note was quoted near the end of the session at 2.40%, after opening at 2.51%.
In economic data released yesterday, initial jobless claims came in at 301,000 the week ended Jan. 12, after 322,000 the previous week. Additionally, continuing jobless claims came in at 2.751 million the week ended Jan. 5, after a revised 2.685 million the prior week. Economists polled by IFR Markets had predicted 335,000 initial jobless claims and 2.710 million continuing claims.
Housing starts came in at 1.006 million in December after a revised 1.173 million the month. Additionally, building permits came in at 1.068 million in December after a revised 1.162 million the previous month. Economists polled by IFR Markets had predicted 1.140 million housing starts and 1.140 million building permits.
Also, manufacturing activity in the Federal Reserve Bank of Philadelphia’s region “weakened this month,” as the general business conditions index plunged to negative 20.9 in January from a revised negative 1.6 in December, this month’s Report on Business indicates. The negative 20.9 reading is the lowest the index has posted since October 2001. Economists surveyed by IFR Markets predicted a reading of negative 1.3 for the index.
In the new-issue market yesterday, First Southwest Co. priced $158.3 million of unlimited-tax school building bonds for Texas’ Denton Independent School District. The bonds mature in 2009, and from 2013 through 2028, with term bonds in 2033 and 2038. Yields range from 2.95% with a 4.5% coupon in 2013 to 4.30% with a 5% coupon in 2038. Bonds maturing in 2009 were decided via sealed bid. The bonds, which are callable at par in 2017, are backed by the Permanent School Fund guarantee program. The underlying credit is rated AA by Standard & Poor’s and AA-minus by Fitch Ratings.
Greensboro, N.C., competitively sold $63.8 million of general obligation bonds in two series. The larger series, $40.2 million of GO public improvement bonds, was won by Piper Jaffray & Co., with a true interest cost of 3.57%. The bonds mature from 2009 through 2025, with coupons ranging from 4% in 2009 to 4.5% in 2025. None of the bonds were formally re-offered, but all are callable at par in 2018.
The smaller series, $23.6 million of GO refunding bonds, was won by BB&T Capital Markets, with a TIC of 3.07%. The bonds mature from 2008 through 2018, with yields ranging from 2.50% with a 3.5% coupon in 2008 to 3.00% with a 5% coupon in 2015. Bonds maturing from 2016 through 2018 were not formally re-offered. These bonds are not callable. The credit is rated triple-A by both Moody’s Investors Service and Standard & Poor’s.
Raymond James & Associates priced $57 million of GO warrants for Mobile, Ala. The bonds mature in 2022, and from 2024 through 2030. Yields range from 4.09% with a 4% coupon in 2022 to 4.46% with a 4.25% coupon in 2030. The bonds, which are callable at par in 2018, are insured by Financial Security Assurance Inc. The underlying credit is rated A1 by Moody’s and AA-minus by Standard & Poor’s.
Roanoke, Va., competitively sold $46.8 million of GO public improvement bonds to Robert W. Baird & Co., with a TIC of 3.95%. The bonds mature from 2009 through 2028, with term bonds in 2033. Yields range from 2.56% with a 3.25% coupon in 2009 to 4.31% with a 4.2% coupon in 2033. The bonds, which are callable at par in 2018, are rated Aa3 by Moody’s, and AA by both Standard & Poor’s and Fitch.
RBC Capital Markets priced $44.8 million of unlimited tax school building bonds for Texas’ Lovejoy Independent School District. The bonds mature from 2018 through 2028, with term bonds in 2038. Yields range from 3.56% with a 4% coupon to 4.33% with a 5% coupon in 2038. The bonds, which are callable at par in 2018, are backed by the Permanent School Fund guarantee program. The underlying credit is rated A1 by Moody’s and A-plus by Standard & Poor’s.
Wachovia Bank NA priced $33 million of enterprise revenue bonds for Oak Island, N.C. The bonds mature from 2010 through 2027, with term bonds in 2033 and 2035. Yields range from 2.86% with a 4% coupon in 2010 through 4.56% with a 4.375% coupon in 2035. The bonds, which are callable at par in 2018, are insured by MBIA Insurance Corp. The underlying credit is rated Baa1 by Moody’s and A-minus by Standard & Poor’s.
More economic data is on tap today, as the preliminary January University of Michigan consumer sentiment index and the December composite index of leading economic indicators will be released. Economists polled by IFR Markets are predicting a reading of 74.7 for the preliminary University of Michigan consumer sentiment index, and a drop of 0.1% in LEI.
