The municipal market was weaker by one or two basis points Friday, mostly holding off a sell-off in the Treasury market prompted by concerns over whether or not the federal government would intervene to shore up confidence in troubled Fannie Mae and Freddie Mac.
“We’re off a smidge, but not as much as Treasuries — they’ve got the hammerlock on them right now,” a trader in Chicago said. “We got decoupled from Treasuries a bit back, and got cheaper and cheaper, so now if they’re off, we’re not going to be off as much.”
The Treasury market showed losses Friday. The yield on the benchmark 10-year Treasury note, which opened at 3.79%, finished at 3.94%. The yield on the two-year note was quoted near the end of the session at 2.60% after opening at 2.40%.
By mid-afternoon, both Fannie Mae and Freddie Mac shares rallied after Treasury Secretary Henry Paulson and President Bush spoke to reassure the market about the health of the companies, and after Sen. Christopher Dodd, D-Conn., chairman of the Banking, Housing, and Urban Affairs Committee, suggested the companies could be given access to emergency Federal Reserve lending.
Freddie Mac shares finished at $7.75 on the New York Stock Exchange Friday, down 3.12%. from $8.00 Thursday. They sank as low as $3.89 during the session. Fannie Mae shares finished at $10.16 on the NYSE Friday, down 23.1% from $13.20 Thursday. They dropped as low as $6.87 Friday.
In tax-exempts, trades reported by the Municipal Securities Rulemaking Board today showed some losses. A dealer bought from a customer Connecticut Housing Finance Authority 5s of 2029 at 5.29%, up one basis point from where they were sold Thursday. A dealer sold to a customer Dormitory Authority of the State of New York 5s of 2038 at 4.67%, one basis point higher than where they traded Thursday. Bonds from an interdealer trade of North Texas Tollway Authority 5.75s of 2038 yielded 5.99%, two basis points higher than where they traded Thursday.
In economic data released Friday, the University of Michigan’s preliminary July consumer sentiment index reading was 56.6, compared to final June 56.4 reading. Economists polled by IFR Markets had predicted a 56.0 reading for the index.
Activity in the new-issue market was light Friday.
However, pricing information was released for a $442.9 million sale of water and sewer system revenue bonds for Miami-Dade County, which RBC Capital Markets priced Thursday. The deal was priced in two series.
Bonds from the larger $374.6 million refunding series mature from 2013 through 2022, with yields ranging from 3.42% with a 5% coupon in 2013 to 4.54% with a 5.25% coupon in 2022. Bonds from this series maturing in 2021 are uninsured. All remaining bonds are insured by Financial Security Assurance Inc.
Bonds from the smaller $68.3 million series mature from 2009 through 2022, with yields ranging from 2.00% with a 3.25% coupon in 2009 to 4.54% with a 4.375% coupon in 2022. All these bonds are insured by FSA. None of the bonds are callable.
The underlying credit is rated A1 by Moody’s Investors Service and A-plus by Standard & Poor’s and Fitch Ratings.
