The municipal market was slightly firmer yesterday, amid a $522.6 million sale that included taxable Build America Bonds from the University of California Regents.
Barclays Capital priced the deal yesterday, which had a $429.2 million BAB portion. The BABs yield 6.458% in 2029 and 6.583% in 2049, or 4.198% and 4.279%, respectively, after the 35% federal subsidy.
For the tax-exempt $93.4 million series, yields range from 1.28% in 2012 to 5.10% in 2038. Retail investors ordered about $75 million of these bonds during the order period, which concluded Wednesday. The BABs were not offered to retail investors.
The credit is rated Aa2 by Moody’s Investors Service and AA-minus by Standard & Poor’s.
In the secondary market, traders said tax-exempt yields were lower by one or two basis points overall.
“We’re doing a little bit better again,” a trader in New York said. “The tone has been firmer the whole week, and that’s continuing on into today. I’m not seeing a tremendous amount of movement, we’re probably better a basis point or two overall, maybe three basis points max here and there. But there’s some decent activity in the secondary, and the market just feels pretty firm.”
“We’re definitely seeing some gains,” a trader in Los Angeles said. “We’re not as firmer as we were earlier in the week, but we’re probably picking up a basis point or two.”
The Treasury market showed losses yesterday. The yield on the benchmark 10-year note opened at 3.31% and was quoted near the end of the session at 3.38%. The yield on the two-year note opened at 0.72% and was quoted near the end of the session at 0.74%. The yield on the 30-year bond was quoted near the end of the session at 4.34% after opening at 4.25%.
Yesterday’s Municipal Market Data triple-A scale yielded 2.72% in 10 years and 3.65% in 20 years, following levels of 2.73% and 3.66%, respectively, on Wednesday. The scale yielded 4.18% in 30 years yesterday, after Wednesday’s level of 4.20%.
As of Wednesday’s close, the triple-A muni scale in 10 years was at 82.7% of comparable Treasuries, according to MMD, while 30-year munis were 98.4% of comparable Treasuries and 30-year tax-exempt triple-A general obligation bonds were at 102.7% of the comparable London Interbank Offered Rate.
Elsewhere in the new-issue market yesterday, Bank of America Merrill Lynch priced $289.4 million of certificates of participation for San Bernardino County, Calif., in two series.
Bonds from the $244.7 million Series A mature from 2010 through 2022, with term bonds in 2024 and 2026. Yields range from 1.79% with a 3% coupon in 2011 to 5.47% with a 5.25% coupon in 2026. The bonds, which are callable at par in 2019. The credit is rated A3 by Moody’s and A-plus by Standard & Poor’s.
Nassau County, N.Y., competitively sold $240.2 million of tax-exempt and taxable bonds and notes in multiple series, including $35 million of BABs.
The county sold $90 million of tax anticipation notes to Janney Montgomery Scott LLC, with a net interest cost of 0.31%. The Tans mature in September 2010, with a 1.5% coupon, and were not formally re-offered.
Nassau County also sold $60 million of Tans to Citi, with a NIC of 0.36%. The Tans mature in October 2010, with a 3% coupon, and were not formally re-offered.
They also sold $55.2 million of tax-exempt GO improvement bonds to Bank of America Merrill Lynch, with a true interest cost of 3.41%. The bonds mature from 2010 through 2025, with yields ranging from 3.50% with a 4% coupon in 2020 to 3.69% with a 4% coupon in 2021. Bonds maturing from 2010 through 2019 and from 2023 through 2025 were not formally re-offered. These bonds are callable at par in 2019.
In addition, Nassau County sold $35 million of taxable BABs to Janney Montgomery Scott. Pricing information on this series was not available by press time. The bonds were slated to mature from 2025 through 2031, and are callable at par in 2019.
The credit is rated A2 by Moody’s, and A-plus by Standard & Poor’s and Fitch Ratings.
In economic data released yesterday, initial jobless claims declined 5,000 to 457,000 for the week ending Nov. 28, the fifth straight weekly drop and the lowest level of claims in more than a year. Continuing jobless claims rose to 5.465 million for the week ending Nov. 21.
Economists expected 480,000 initial claims and 5.400 continuing claims, according to the median estimate from Thomson Reuters.
Nonfarm productivity was revised to an annual rate of increase of 8.1% for the third quarter. Unit labor costs were revised to a 2.5% annual rate of decline.
Economists expected productivity to be revised lower to an 8.0% annual rate increase and for unit labor costs to be revised to a 5.5% annual rate decline in the third quarter, according to economists polled by Thomson Reuters.
The Institute for Supply Management’s non-manufacturing business activity composite index was 48.7 in November, off from 50.6 in October. Economists polled by Thomson Reuters had expected a 51.5 level.
