Munis Feel a 'Bit Firmer Out There’

The municipal market was slightly firmer yesterday. Traders said tax-exempt yields were lower by two or three basis points overall.“It feels a little bit firmer out there,” a trader in New York said. “We’re probably better a good two, three basis points overall. We’re definitely three better out long — it’s a bit firmer out long than it is elsewhere along the curve. Business is getting done, but it’s not terribly active.”

“The long end is better a few basis points, maybe three on the really long end,” a trader in Los Angeles said. “It’s still quiet, but it’s picking up a bit. There’s still not a ton of supply out there, and we’re going to need to get some more supply out in the marketplace before activity really starts picking up in earnest. But as far as it goes, we’re doing somewhat better, definitely a little bit firmer, with most of those gains out long.”

In the new-issue market yesterday, New York’s Triborough Bridge and Tunnel Authority competitively sold $200 million of general revenue taxable Build America Bonds to Merrill, Lynch & Co. The bonds mature in 2036 and 2039.

The bonds maturing in 2036, which have a 5.42% coupon, or 3.52% after the 35% federal subsidy, were sold and not available. The 2039 bonds yield 5.50% priced at par, or 3.58% after the subsidy, and were priced to yield 125 basis points over the comparable Treasury yield. The bonds, which are not callable, are rated Aa2 by Moody’s Investors Service, AA-minus by Standard & Poor’s, and AA by Fitch Ratings.

Barclays Capital priced $250 million of Permanent University Fund-backed taxable BABs for the University of Texas Board of Regents. The  bonds mature in 2039, yielding 5.26% priced at par, or 3.42% after the 35% federal subsidy.

The bonds were priced to yield 100 basis points over the comparable Treasury yield. The bonds contain a make-whole call at Treasuries plus 20 basis points, and are rated triple-A by all three major rating agencies.

Merrill priced $350 million of taxable bonds for North Carolina’s Novant Health Inc. The bonds mature in 2014 and 2019, yielding 4.67% with a 4.65% coupon and 5.853% with a 5.85% coupon, respectively. The bonds were priced to yield 240 and 250 basis points over the comparable Treasury yield.

The bonds, which contain a make-whole call at Treasuries plus 40 basis points, are rated A1 by Moody’s, A-plus by Standard & Poor’s, and AA-minus by Fitch.

The Treasury market showed gains yesterday. The yield on the benchmark 10-year note, which opened at 3.47%, was quoted near the end of the session at 3.36%. The yield on the two-year note was quoted near the end of the session at 0.90% after opening at 0.92%. The yield on the 30-year bond, which opened at 4.33%, was quoted near the end of the session at 4.20%.

As of Wednesday’s close, the triple-A muni scale in 10 years was at 82.8% of comparable Treasuries, according to ­Municipal Market Data, while 30-year munis were 97.2% of comparable Treasuries. As of the close Wednesday, 30-year tax-exempt triple-A general obligation bonds were at 101.7% of the comparable London Interbank Offered Rate.

Secondary market trades reported by the Municipal Securities Rulemaking Board yesterday showed gains. Bonds from an interdealer trade of California 5s of 2037 yielded 5.24%, down two basis points from where they traded Wednesday. A dealer bought from a customer New Jersey Turnpike Authority 5.25s of 2040 at 4.50%, three basis points lower than where they were sold Wednesday.

Bonds from an interdealer trade of Nassau County, N.Y., 4s of 2022 yielded 3.80%, down one basis point from where they traded Wednesday.

Morgan Stanley priced $50 million of hospital facilities revenue bonds for Greenwood County, S.C. The bonds mature from 2018 through 2023, with a term bond in 2039. Yields range from 4.44% with a 4.375% coupon in 2018 to 5.45% with a 5.375% coupon in 2039. The bonds, which are callable at par in 2019, are rated A2 by Moody’s and A by Standard & Poor’s.

Raymond James & Associates Inc. priced $22.5 million of GO limited-tax BABs for Illinois’ Cook County School District No. 99.

The bonds mature from 2017 through 2022 and in 2025. Yields range from 4.60% priced at par in 2017 to 5.83% with a 5.7% coupon in 2025, or from 2.99% in 2017 to 3.71% in 2025 after the 35% federal subsidy.

The bonds were priced to yield between 120 and 243 basis points over comparable Treasury yields. The bonds, which are callable at par in 2019, are rated AA-minus by Standard & Poor’s.

Wachovia Bank NA priced $15.2 million of sewer revenue refunding bonds for New Jersey’s Atlantic County Utilities Authority.

The  bonds mature from 2010 through 2015, with yields ranging from 1.27% with a 4% coupon in 2010 to 3.00% with a 5% coupon in 2015. The bonds, which are not callable, are insured by Assured ­Guaranty Corp. The underlying credit is rated A by Fitch.

In economic data released yesterday, initial jobless claims fell to 550,000, a number lower than economists’ estimates, for the week ending Sept. 5 from an upwardly revised 576,000 claims in the previous week. Economists polled by Thomson Reuters expected jobless claims to fall to 560,000, according to the median estimate.

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