The municipal market was weaker yesterday. Traders said tax-exempt yields were higher by three to five basis points.
"I won't say it's lack of interest. There is interest, but you've got to have the right paper," a trader in New York said. "The last few days I've had decent distribution. I really can't complain, but I think a lot of dealers have their hands tied, they're told not to bid. And I think those who do have rope to hang themselves, and they're being very careful, because there's fear of all the secondary conversion from auction rates and floaters into fixed rate. It's also a very lean time of year for business. March and April aren't exactly big months for reinvestment."
Trades reported by the Municipal Securities Rulemaking Board yesterday showed losses. Bonds from an interdealer trade of insured Colorado's Park Creek Metropolitan District 5.5s of 2037 yielded 5.62%, up three basis points from where they were sold Monday. A dealer sold to a customer Fairfax County, Va., 4.5s of 2026 at 4.68%, two basis points higher they were they traded Monday. Bonds from an interdealer trade of insured Los Angeles Unified School District 4.5s of 2025 yielded 4.81%, up one basis point from where they traded Monday. Bonds from an interdealer trade of New York's Metropolitan Transportation Authority 5s of 2037 yielded 5.17%, even with where they were traded Monday.
The Treasury market, however, showed gains yesterday. The yield on the benchmark 10-year Treasury note, which opened at 3.90%, finished at 3.86%. The yield on the two-year note was quoted near the end of the session at 2.03%, after opening at 2.11%.
In economic data released yesterday, the producer price index rose 1.0% in January, after a revised 0.3% drop the previous month. Additionally, the PPI core increased 0.4% in January after a 0.2% uptick in December. Economists polled by IFR Markets had predicted a 0.3% rise in PPI and a 0.2% increase in the PPI core.
Also, the consumer confidence index plunged in February dropping to 75.0 from a downwardly revised 87.3 last month. Economists polled by IFR Markets predicted the index would slip to 81.3.
Later this week, some significant economic data will be released. Today, durable goods for January will be released, as will January new home sales. Initial jobless claims for the week ended Feb. 23 and continuing jobless claims for the week ended Feb. 16 will follow tomorrow, along with the preliminary fourth quarter gross domestic product. January personal income, January personal consumption, the January core personal consumption expenditures deflator, the Chicago purchasing managers index for February, and the final February University of Michigan consumer sentiment will be released Friday.
Economists polled by IFR Markets are predicting a 3.5% dip in durable goods, a 0.7% drop in durable goods excluding transportation, 600,000 new home sales, a 0.7% increase in GDP, 350,000 initial jobless claims, 2.800 million continuing jobless claims, 0.2% growth in personal income, a 0.2% uptick in personal consumption, 2.2% rise to the core PCE deflator, a 50.0 Chicago PMI reading, and a 70.0 level for the Michigan sentiment index.
In the new-issue market yesterday,the Municipal Electric Authority of Georgia was scheduled to competitively sell about $238 million of taxable and tax-exempt bonds in four series. However, all bids were rejected, and the sale was cancelled until further notice. Calls to the issuer's financial adviser, Public Financial Management Inc., were not returned by press time. MEAG was scheduled to competitively sell a $106.5 million taxable series, a $57.8 million taxable series, a tax-exempt series worth $39.6 million, and a $33.6 million tax-exempt series. The credit is rated A2 by Moody's Investors Service, A by Standard & Poor's, and A-plus by Fitch Ratings.
Lehman Brothers priced $134.7 million of revenue bonds for the Massachusetts Health and Educational Facilities Authority. The bonds mature from 2023 through 2028, with term bonds in 2030 and 2035. Yields range from 4.62% with a 5% coupon in 2023 to 4.96% with a 5.5% coupon in 2035. The bonds are not callable, except for those bonds maturing in 2023, which are callable at par in 2018. The credit is rated Aa3 by Moody's Investors Service and AA-minus by Standard & Poor's.
Banc of America Securities LLC priced $56.5 million of general obligation bonds for El Paso. The bonds mature from 2010 through 2024, with term bonds in 2028 and 2033. Yields range from 2.34% with a 3.5% coupon in 2010 to 4.98% with a 4.75% coupon in 2033. The bonds, which are callable at par in 2018, are insured by Financial Security Assurance Inc. The underlying credit is rated AA by Standard & Poor's and AA-minus by Fitch.
The Buena Park, Calif.,Community Redevelopment Agency competitively sold $48.4 million of consolidated redevelopment project tax allocation bonds to Morgan Stanley with a true interest cost of 5.71%. The bonds mature from 2009 through 2022, with term bonds in 2025, 2028, 2033, and 2035. Yields range from 3.00% priced at par in 2009 to 5.70% with a 6.25% coupon in 2035. The bonds, which are callable at par in 2018, are rated A3 by Moody's and A by Standard & Poor's.
The Peoria, Ariz., Municipal Development Authority competitively sold $47 million of senior-lien transportation sales tax and subordinate-lien excise tax and state shared revenue bonds to Robert W. Baird & Co. with a TIC of 4.52%. The bonds mature from 2009 through 2026, with yields ranging from 2.23% with a 3.5% coupon in 2009 to 4.83% with a 4.75% coupon in 2024. Bonds maturing in 2025 and 2026 were not formally re-offered. The bonds, which are callable at par in 2018, are rated Aa3 by Moody's, AA by Standard & Poor's, and A-plus by Fitch.
