The municipal market was mostly unchanged yesterday, with some firmness exhibited on the long end, as California’s M-S-R Energy Authority came to market with a $900 million sale.“We are seeing some activity out long,” a trader in Los Angeles said. “There isn’t too much movement elsewhere on the curve, but we’re picking up a few basis points on the long end. Maybe one or two basis points better out there.”
In the new-issue market yesterday, Citi priced $901.6 million of gas revenue bonds for M-S-R in three series. Bonds from the $201 million Series A mature in 2029, 2034, and 2039, yielding 6.375% with a 6.125% coupon, 6.68% with a 7% coupon, and 6.70% with a 6.5% coupon, respectively. Bonds from the $500.2 million Series B mature in 2029, 2034, and 2039, yielding 6.375% with a 6.125% coupon, 6.68% with a 7% coupon, and 6.70% with a 6.5% coupon, respectively.
Bonds from the $200.4 million Series C also mature in 2029, 2034, and 2039, yielding 6.375% with a 6.125% coupon, 6.68% with a 7% coupon, and 6.705 with a 6.5% coupon, respectively. The bonds have a make-whole call at 25 basis points less than the corresponding triple-A yield. The credit is rated A by Standard & Poor’s and A-plus by Fitch Ratings.
California Treasurer Bill Lockyer yesterday announced that the state has closed its $1.5 billion loan deal with JPMorgan that will allow California to pay off IOUs it has issued to individuals, vendors and local governments. According to a press release, the state will start paying off, or redeeming, the IOUs starting Sept. 4, and stop issuing them the same day.
Under the deal, JPMorgan purchased $1.5 billion of short-term interim revenue anticipation notes to help the state redeem the IOUs. California will pay JPMorgan zero fees and 3%, according to the release. The state is paying 3.75% interest on the IOUs and plans to repay the loan when it sells a larger deal of revenue anticipation notes, also in September.
The Treasury market showed losses yesterday. The yield on the benchmark 10-year note, which opened at 3.43%, finished at 3.47%. The yield on the two-year note was quoted near the end of the session at 1.06% after opening at 1.05%. The yield on the 30-year bond, which opened at 4.19%, finished at 4.23%.
As of yesterday’s close, the triple-A muni scale in 10 years was at 85.8% comparable Treasuries, according to Municipal Market Data, while 30-year munis were 107.4% of comparable Treasuries. As of the close yesterday, 30-year tax-exempt triple-A general obligation bonds were at 110.5% of the comparable London Interbank Offered Rate.
Elsewhere in the new-issue market yesterday, Merrill, Lynch & Co. priced $179.1 million of revenue refunding and improvement bonds for the West Virginia Hospital Finance Authority. The bonds mature from 2010 through 2021, with term bonds in 2023, 2025, 2028, and 2032.
Yields range from 2.00% with a 3% coupon in 2010 to 5.83% with a 5.625% coupon in 2032. The bonds are callable at par in 2019, except those maturing in 2025 and 2028, which are callable at par in 2014. The credit is rated A2 by Moody’s Investors Service.
JPMorgan priced $78.5 million of taxable direct-subsidy Build America Bonds for Austin. The bonds mature from 2017 through 2020, with term bonds in 2024 and 2029. Yields range from 4.15% in 2017, or 2.69% after the 35% federal subsidy, to 5.31% in 2029, or 3.45% after the subsidy. The bonds were priced to yield between 70 and 130 basis points over the comparable Treasury yields. The credit is rated Aa1 by Moody’s, AAA by Standard & Poor’s, and AA-plus by Fitch.
JPMorgan also priced $47.2 million of tax-exempt bonds for Austin, in three series. Bonds from a $20.9 million series mature from 2010 through 2016, with yields ranging from 0.91% with a 3% coupon in 2011 to 2.58% with a 5% coupon in 2016. Bonds maturing in 2010 were decided via sealed bid. The bonds are not callable.
Bonds from a $12.5 million series mature from 2010 through 2029, with term bonds in 2034 and 2039. Yields range from 0.91% with a 3% coupon in 2011 to 4.80% with a 4.75% coupon in 2039. Bonds maturing in 2010 were decided via sealed bid. The bonds are callable at par in 2019. Bonds from a $13.8 million series mature from 2010 through 2019, with yields ranging from 0.75% with a 3% coupon in 2010 to 3.31% with a 3.25% coupon in 2019. The bonds are not callable.
In economic data released yesterday, initial jobless claims for the week ended Aug. 22 came in at 570,000 after a revised 580,000 the previous week. Economists polled by Thomson Reuters had predicted 565,000 initial jobless claims.
Continuing jobless claims for the week ended Aug. 15 came in at 6.133 million after a revised 6.252 million the week before. Economists polled by Thomson had predicted 6.240 million continuing claims.
The preliminary second-quarter gross domestic product fell 1.0%, unchanged from the 1.0% drop in the previous report. Economists polled by Thomson Reuters had predicted a 1.5% decline.
