Munis Firmer; Massachusetts Prices BABs

The municipal market was slightly firmer yesterday, as Massachusetts came to market with an upsized $956 million sale of taxable Build America Bonds.

Goldman, Sachs & Co. priced the deal, which matures in 2030 and 2039. The bonds yield 5.306% in 2030 and 5.456% in 2039, or 3.45% and 3.55% respectively after the 35% federal subsidy, both priced at par. The bonds were priced to yield 105 and 120 basis points over the comparable Treasury yield, respectively.

The bonds, which contain a make-whole call at Treasuries plus 20 basis points, are rated Aa2 by Moody’s Investors Service and AA by Standard & Poor’s and Fitch Ratings.

Traders said tax-exempt yields in the secondary market were flat to lower by about two basis points overall.

“There’s a bit of firmness out there,” a trader in New York said. “We’re still pretty unchanged on the whole, and there’s not a ton of activity out in the secondary, but the tone is definitely a bit firmer, and more so on the shorter end.”

“We’re definitely doing a bit better,” a trader in Los Angeles said. “I’m not sure it’s more than a basis point or two overall, but it feels firmer. Maybe in spots it’s three, even four basis points better, but most of the curve, it’s a basis point or two, if at all. But there’s definitely a solid, firm tone.”

The Treasury market showed losses yesterday. The yield on the benchmark 10-year note opened at 3.19% and finished at 3.29%. The yield on the two-year note opened at 0.67% and finished at 0.68%. The yield on the 30-year bond finished at 4.28% after opening at 4.19%.

Today’s Municipal Market Data triple-A scale yielded 2.78% in 10 years and 3.73% in 20 years, following levels of 2.78% and 3.73%, respectively, Monday. The scale yielded 4.25% in 30 years yesterday, after Monday’s level of 4.28%.

As of Monday’s close, according to MMD, the triple-A muni scale in 10 years was at 86.1% of comparable Treasuries,  30-year munis were 101.7% , and 30-year tax-exempt triple-A general obligation bonds were at 106.7% of the comparable London Interbank Offered Rate.

Elsewhere in the new-issue market yesterday, Barclays Capital priced $290 million of taxable and tax-exempt GOs for Tennessee.

Bonds from the $235.8 million tax-exempt Series C mature from 2011 through 2030, with yields ranging from 0.62% with a 2.5% coupon in 2011 to 3.91% with a 5% coupon in 2030. The bonds are callable at par in 2018. Bonds from the $54.2 million taxable Series D mature from 2013 through 2024, with term bonds in 2029. The bonds were priced to yield between 75 and 167 basis points over the comparable Treasury yield, and are callable at par in 2019.

The credit is rated Aa1 by Moody’s and AA-plus by both Standard & Poor’s and Fitch.

JPMorgan priced for retail investors $125.5 million of general airport revenue bonds for the Tulsa Airports Improvement Trust in multiple series.

Bonds from the $43.8 million Series A mature from 2010 through 2019, with a term bond in 2024. Yields range from 1.80% with a 3% coupon in 2010 to 5.03% with a 5% coupon in 2019. Bonds maturing in 2024 were not offered during the retail order period. These bonds are callable at par in 2015.

Bonds from the $26.3 million Series B mature from 2011 through 2019, with term bonds in 2024 and 2031, and yields ranging from 2.21% with a 3% coupon in 2011 to 5.83% with a 5.75% coupon in 2031. Bonds maturing in 2024 were not offered during the retail order period. The bonds are callable at par in 2015.

Bonds from the $4 million Series C, which is subject to the alternative minimum tax, matures from 2010 through 2019, with a term bond in 2023. Yields range from 2.55% with a 3% coupon in 2010 to 6.23% with a 6% coupon in 2023. The bonds are callable at par in 2015.

Bonds from the $51.3 million taxable Series D mature from 2010 through 2019, with term bonds in 2024 and 2031. Bonds maturing in 2024 and 2031 were not offered during the retail order period. The bonds were priced to yield between 200 and 380 basis points over the comparable Treasury yield. The bonds are callable at par in 2019.

The credit is rated A3 by Moody’s and BBB-plus by Standard & Poor’s.

Wells Fargo Securities priced $106.7 million of tax-exempt and taxable bonds for Jacksonville, Fla., including $37.1 million of BABs.

The BABs mature from 2016 through 2021, with yields ranging from 4.24% in 2016, or 2.76% after the 35% federal subsidy, to 4.99% in 2021, or 3.24% after the subsidy, all priced at par. The bonds were priced to yield between 100 and 175 basis points over the comparable Treasury yield. The bonds contain a make-whole call at Treasuries plus 30 basis points.

The tax-exempt $69.6 million series matures from 2010 through 2016, with yields ranging from 1.34% with a 3% coupon in 2011 to 3.07% with a 5% coupon in 2016. Bonds maturing in 2010 were decided via sealed bid. The bonds are not callable.

The credit is rated Aa3 by Moody’s and AA-minus by Standard & Poor’s and Fitch.

In economic data released yesterday, pending home sales increased 3.7% to a reading of 114.1 in October from a revised to 110.0 in September. Thomson Reuters’ poll of economists had predicted a 109.5 reading.

According to the Institute for Supply Management’s monthly report on business, the ISM index dipped to 53.6 in November from 55.7 in October. Economists polled by Thomson Reuters predicted the index would drop to 55.0.

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