Week’s Firmer Tone Turns Around a Bit

The municipal market was unchanged to slightly weaker yesterday. Traders said tax-exempt yields were flat to higher by one or two basis points.“It’s somewhat quiet, not too much trading going on, but there’s a weaker tone in the market now,” a trader in Los Angeles said. “It was fairly flat in the morning, but some weakness has crept in, more so I guess in the intermediate maturities. But it’s just following Treasuries a bit, I think. We’re about a basis point or two cheaper in spots, but maybe a little flat in others. On the whole though, just a bit weaker.”

“There’s been a firmer tone pretty much the whole week, but it’s turned around a bit today,” a trader in New York said. “I wouldn’t say we’re exceptionally weaker, but there’s a weaker tone. We’re still probably close to unchanged on the whole, but it feels the weakest it’s felt this week.”

The Treasury market showed losses yesterday. The yield on the benchmark 10-year note, which opened at 3.69%, was quoted near the end of the session at 3.83%. The yield on the two-year note was quoted near the end at 1.25% after opening at 1.16%. The yield on the 30-year bond, which opened at 4.51%, was quoted near the session’s end at 4.61%.

As of Wednesday’s close, the triple-A muni scale in 10 years was at 90.6% of comparable Treasuries, according to Municipal Market Data. Additionally, 30-year munis were 104.7% of comparable Treasuries. At Wednesday’s close, 30-year tax-exempt triple-A general obligation bonds were at 111.7% of the comparable London Interbank Offered Rate.

Trades reported by the Municipal Securities Rulemaking Board yesterday showed some losses. Bonds from an interdealer trade of Arizona Board of Regents 6s of 2027 yielded 4.66%, up one basis point from where they traded Wednesday. Bonds from an interdealer trade of insured New Jersey Educational Facilities Authority 5s of 2026 yielded 5.14%, up one basis point from where they were sold Wednesday. Bonds from an interdealer trade of California 5s of 2027 yielded 5.72%, up one basis point from where they traded Wednesday. A dealer sold to a customer taxable Illinois 6s of 2033 at 6.07%, up two basis points from where they traded Wednesday.

In the new-issue market yesterday, Goldman, Sachs & Co. priced $300 million of second general highway and bridge trust fund bonds for the New York State Thruway Authority. The bonds mature from 2010 through 2029, with yields ranging from 1.35% with a 2.5% coupon in 2011 to 4.96% with a 5% coupon in 2029. Bonds maturing in 2010 were decided via sealed bid. The bonds, which are callable at par in 2019, are rated AA by Standard & Poor’s and AA-minus by Fitch Ratings.

Wachovia Bank NA priced $260 million of taxable notes for Illinois’ Regional Transportation Authority. The notes contain a split maturity in 2011, yielding 2.88% and 2.98%, both priced at par. The notes were priced to yield 165 and 175 basis points over the comparable Treasury yields. The credit is rated SP-1-plus by Standard & Poor’s and F1-plus by Fitch.

JPMorgan priced $212.5 million of multifamily housing revenue bonds for the New York City Housing Development Corp. in three series. Bonds from the $118.2 million Series C-1 mature from 2012 through 2019, with term bonds in 2024, 2029, 2034, 2039, and 2046. Yields range from 2.50% priced at par in 2012 to 5.70% priced at par in 2046. The bonds are callable at par in 2019. Bonds from the $84.8 million Series C-2 mature from 2011 through 2013, with yields ranging from 2.30% priced at par in 2011 to 3.50% priced at par in 2013. The bonds are not callable, except bonds maturing in 2013, which are callable at par in 2011. Bonds from the $9.5 million Series D mature in 2013. The bond were not formally re-offered, and are callable at par in 2011. The credit is rated Aa2 by Moody’s Investors Service and AA by Standard & Poor’s.

Ohio completed a $50 million Build America Bond sale, the first issue under the state’s $100 million Logistics and Distribution Infrastructure Program. Further details were not available by press time.

“We’re pleased to have used this federal stimulus program for what it was intended — to save money for states like Ohio and help stimulate the economy,” state Treasurer Kevin L. Boyce said. “Helping create jobs and saving taxpayer dollars are ways we can help Ohio emerge from this difficult economic environment.”

Initial jobless claims for the week ended June 13 came in at 608,000 after a revised 605,000 the previous week. Economists polled by Thomson Reuters had predicted 600,000 initial jobless claims.

Continuing jobless claims for the week ended June 6 came in at 6.687 million after a revised 6.835 million the previous week, falling for the first time since the Jan. 3 week after rising for 21 consecutive weeks. Economists had predicted 6.850 million continuing jobless claims.

The composite index of leading economic indicators surged 1.2% in May after increasing a revised 1.1% in April. The LEI stands at 100.2. Economists predicted LEI would be up 0.9% in the month.

Also, the Federal Reserve Bank of Philadelphia’s general business conditions index increased to negative 2.2 in June from negative 22.6 in May. Economists surveyed by Thomson Reuters predicted a reading of negative 17.4 for the index.

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