The municipal market was weaker by about two basis points overall yesterday despite sizeable gains in the Treasury market.
"The market is going in the divergent direction from Treasuries," a trader in Los Angeles said. "The market decided to just get easier. I think there's just a lot of people that don't know what's going on and they're confused and so they're not really able to make up an intelligent decision."
A trader in New York said participants are paying most attention to the auction-rate market and the yields currently available there.
"The market bid side is abysmal at the moment," the trader said. "The bids are very weak, because buyers are focused on the auction rate side, and that makes sense, given the yields that are available. Until those yields come back down, there's no need to rush, especially if you believe that a lot of these deals can get fixed out."
"It's going to keep pressure on the longer end of the market," the trader said. "Long-term sales people who we talk to say their entire days are being occupied with auction-rate securities, because their buyers, who are usually long-term buyers, are buying these things. Muni yields are rising, and we're really seriously underperforming."
The Treasury market was firmer yesterday. The yield on the benchmark 10-year Treasury note, which opened at 3.89%, finished at 3.97%. The yield on the two-year note was quoted near the end of the session at 1.97% after opening at 2.13%.
In economic data released yesterday, initial jobless claims for the week ended Feb. 16 came in at 349,000 after a revised 358,000 the previous week. Also, continuing jobless claims for the week ended Feb. 9 came in at 2.784 million after a revised 2.736 million the week before. Economists polled by IFR Markets had predicted 348,000 initial jobless claims and 2.775 million continuing jobless claims.
The composite index of leading economic indicators dropped 0.1% in January, after a 0.1% decline the previous month. Economists polled by IFR had predicted a 0.1% dip.
In the new-issue market yesterday, Morgan Stanley priced $218.5 million of limited-tax general obligation and refunding bonds for the King County, Wash., Public Hospital District No.1 in two series. Bonds from the larger series, $113.5 million, mature from 2011 through 2018, with term bonds in 2023, 2028, and 2037. Yields range from 2.63% with a 4% coupon in 2011 to 5.14% with a 5% coupon in 2037. Bonds from the smaller series, $105 million, mature in 2023, 2028, and 2037, yielding 4.78%, 5.09%, and 5.34%, respectively, all with 5% coupons.
All bonds are callable at par in 2018. Bonds from the larger series are insured by Assured Guaranty Corp. Bonds from the smaller series are uninsured. The underlying credit is rated A1 by Moody's Investors Service and AA-minus by Standard & Poor's.
Fort Lauderdale competitively sold $155 million of water and sewer revenue bonds to Wachovia Bank NA, with a true interest cost of 4.71%. The bonds mature from 2009 through 2028, with term bonds in 2032, 2035, and 2036. Yields range from 2.05% with a 4% coupon in 2009 to 4.16% with a 4.125% coupon in 2019. Bonds maturing from 2020 through 2036 were not formally re-offered. The bonds, which are callable at par in 2018, are rated Aa2 by Moody's and AA by Standard & Poor's.
Bear, Stearns & Co. priced $116.2 million of mandatory tender certificates of participation, which mature in 2025, yielding 4.00% with a 5% coupon. The deal is insured by Financial Guaranty Insurance Co., and the underlying credit is rated A1 by Moody's, AA-minus by Standard & Poor's, and A-plus by Fitch Ratings.
Banc of America Securities LLC priced $83.6 million of limited ad valorem tax bonds for Sarasota County, Fla. The bonds mature from 2008 through 2029, with yields ranging from 2.54% with a 3.25% coupon in 2010 to 5.02% with a 5.25% coupon in 2029. The bonds, which are callable at par in 2018, are rated Aa3 by Moody's and A-plus by Standard & Poor's.
Banc of America also priced $76.5 million of GOs for El Paso in two series. Bonds from the larger $55.2 million series mature from 2010 through 2024, with term bonds in 2028 and 2033. Yields range from 2.32% with a 3.5% coupon in 2010 to 5.00% with a 4.75% coupon in 2033. Bonds from the smaller $21.4 million series of refunding bonds mature from 2009 through 2014, with yields ranging from 2.52% with a 5% coupon in 2010 to 3.36% with a 5% coupon in 2014. Bonds maturing in 2009 were decided via sealed bid. The bonds are insured by Financial Security Assurance Inc. The underlying credit is rated AA by Standard & Poor's and AA-minus by Fitch.
Monmouth County, N.J., competitively sold $29.5 million of refunding bonds to Robert W. Baird & Co., with a TIC of 2.96%. The bonds mature from 2011 through 2016, with yields ranging from 2.43% with a 4.5% coupon in 2011 to 3.27% with a 3.5% coupon in 2016. The bonds, which are not callable, are rated triple-A by all three major rating agencies.
