The municipal market was slightly firmer yesterday, with both the economic and new-issue calendars light.
Traders said tax-exempt yields were lower by about one basis point overall.
Trades reported by the Municipal Securities Rulemaking Board yesterday showed some gains. A dealer sold to a customer Michigan State Hospital Finance Authority 5s of 2038 at 5.12%, down one basis point from where they were sold Friday. A dealer bought from a customer insured California Economic Development Financing Authority 5s of 2012 at 2.90%, down one basis point from where they traded Friday. Bonds from an interdealer trade of California 5s of 2021 yielded 4.06%, even with where they traded Friday. A dealer sold to a customer Maryland Health & Higher Educational Facilities Authority 5s of 2037 at 5.47%, three basis points lower than where they were sold Friday.
“It’s somewhat quiet, but we’re moving a few bits and pieces here and there,” a trader in New York said. “People are kind of sitting tight with their bonds and waiting for new inventory to come in, as I think the market is going to get tighter and more expensive.”
The Treasury market showed little movement yesterday. The yield on the benchmark 10-year Treasury note, which opened at 3.79%, was recently quoted at 3.78%. The yield on the two-year note was quoted recently at 2.57% after opening at 2.56%.
The economic calendar was light yesterday. However, a full slate of potentially market-moving data is scheduled for the rest of the week. Today, December retail sales and retail sales excluding autos will be released, as will the December producer price index report, the January Empire State manufacturing index, November business inventories, and November business sales. Tomorrow, the December consumer price index report will be released, while Thursday will see the release of initial jobless claims for the week ending Jan. 12, continuing jobless claims for the week ending Jan. 5, and the Federal Reserve Bank of Philadelphia’s January manufacturing survey. And Friday, the preliminary January University of Michigan consumer sentiment index and the December leading indicators number will be released.
Economists polled by IFR Markets are predicting no growth in retail sales, a 0.1% drop in retail sales excluding autos, a 0.2% gain in the PPI and the PPI core, a reading of 9.75 on the Empire State manufacturing index, a gain of 0.5% for business inventories, 1.7% growth for business sales, a increase 0.2% in the CPI and its core rate, 335,000 initial claims, 2.71 million continuing claims, a level of negative 1.3 on the January Philadelphia Fed survey, a reading of 74.7 for the preliminary University of Michigan consumer sentiment index, and a drop of 0.1% in the leading indicators.
Chicago will lead the way in the new-issue market this week, as Lehman Brothers will price an $876 million offering that was originally slated to hit the market last year. Lehman will price the bonds for O’Hare International Airport today in several series. The city initially planned to sell the bonds in November but decided to hold it due to a rise in interest rates over the fall that would have cut the savings of the refunding piece.
About $765 million of the deal will be third-lien general airport revenue bonds, while $109 million of the deal will be passenger facility charge revenue bonds. The underlying credit on the bonds, which will be insured by Financial Security Assurance Inc., is rated A1 by Moody’s Investors Service, A-minus by Standard & Poor’s, and A by Fitch Ratings.
In other activity, gilt-edged Fairfax County, Va., today will competitively sell $237.9 million of public improvement bonds. The bonds are set to mature from 2009 through 2028, and will be callable at par in 2018.
Also, JPMorgan today will price $378.4 million of sewerage system revenue bonds. The bonds are scheduled to mature serially from 2023 through 2032. Moody’s rates the bonds Aa2 and both Standard & Poor’s and Fitch rate them AA.
In the new-issue market yesterday, Texas’ Lewisville Independent School District competitively sold $87.7 million of unlimited-tax school building bonds to First Southwest Co. with a true interest cost of 4.31%. The bonds mature from 2011 through 2028, with yields ranging from 2.88% with a 3.5% coupon in 2011 to 4.40% with a 4.25% coupon in 2028. The bonds, which are callable at par in 2017, are rated AA-plus by Standard & Poor’s and AA by Fitch.
