The municipal market was mostly unchanged yesterday in light activity, absorbing an onslaught of primary activity this week led by Tuesday’s $6.5 billion California offering.
“There’s some trading going on out there, but not a whole lot at this point,” a trader in New York said. “I think it’s more picking up from yesterday, dealing with the supply that’s out there now. We’re pretty flat, but there’s still an underlying weakness in the market. I don’t know if I’d say things are trading any cheaper, or that I’d call it down a basis point or anything, but there is certainly a weaker tone. But I’d say we’re flat.”
Trades reported by the Municipal Securities Rulemaking Board yesterday showed little movement.
A dealer sold to a customer insured Chicago 5s of 2028 at 5.20%, even with where they traded Wednesday. Bonds from an interdealer trade of insured California Infrastructure and Economic Development Bank 5s of 2035 yielded 4.18%, even with a Wednesday trade.
A dealer sold to a customer insured Houston 5.375s of 2038 at 5.68%, even with Wednesday. A dealer sold to a customer Oregon 5s of 2029 at 5.16%, even with where they were sold Wednesday. Bonds from an interdealer trade of California 5.125s of 2025 yielded 5.57%, even with Wednesday.
“That Cal deal sure is a lot of supply to digest,” a trader in Los Angeles said. “I think a lot of people just needed to get their bearings after that. There was a lot of supply in addition to that deal this week too, so I think it’s more people collecting themselves for a bit and gearing up for more supply next week.”
The Treasury market showed gains yesterday. The yield on the benchmark 10-year note, which opened at 2.78%, was quoted near the end of the session at 2.75%.
The yield on the two-year note was quoted near the end of the session at 0.92% after opening at 0.95%. The yield on the 30-year bond, which opened at 3.74%, was quoted near the end of the session at 3.66%.
The Treasury Department auctioned $24 billion of seven-year notes, with a 2 3/8% coupon, a 2.384% high yield, a price of about 99.94. The bid-to-cover ratio was 2.52. Federal Reserve banks bought roughly $1.1 billion for their own accounts in exchange for maturing securities.
As of Wednesday’s close, the triple-A scale in 10 years was at 117.0% of comparable Treasuries, according to Municipal Market Data.
Additionally, 30-year munis were 130.7% of comparable Treasuries. As of the close Wednesday, 30-year tax-exempt triple-A rated general obligation bonds were at 143.1% of the comparable London Interbank Offered Rate.
Activity in the new-issue market yesterday was somewhat quiet, after an onslaught of supply this week that saw more than $10 billion priced in the primary market, led by California’s offering.
Leading the way yesterday, the California development bank came to market with $270.5 million of refunding revenue bonds in four series, priced by two different underwriters.
JPMorgan priced $135.3 million of the debt. Bonds from the $81.2 million Series A-1 mature in 2047, yield 2.50% and are priced at par. Bonds from the $54.1 million Series A-3 mature in 2047, yield 2.25% and are priced at par.
Morgan Stanley priced $135.2 million of the bonds. Bonds from the $81.1 million Series A-2 mature in 2047, yield 0.60% and are priced at par. Bonds from the $54.1 million Series A-4 mature in 2047, yield 1.75% and are priced at par. None of the bonds are callable. The credit is rated triple-A by Moody’s Investors Service and Standard & Poor’s.
Barclays Capital priced $106.7 million of student fee bonds for Indiana’s Purdue University Board of Trustees. The bonds mature from 2009 through 2028, with yields ranging from 1.10% with a 5% coupon in 2010 to 5.10% with a 5% coupon in 2028.
Bonds maturing in 2009 will be decided via sealed bid. The bonds, which are callable at par in 2019, are rated Aa1 by Moody’s and AA by Standard & Poor’s.
RBC Capital Markets priced $61.9 million of certificates of participation for Durham County, N.C. The COPs mature from 2012 through 2027, with a term bond in 2031.
Yields were from 2.08% with a 3% coupon in 2012 to 5.17% with a 5% coupon in 2031. The certificates, which are callable at par in 2019, are rated Aa1 by Moody’s and AA-plus by Standard & Poor’s.
Morgan Stanley priced $28.9 million of enterprise refunding and improvement revenue bonds for the Colorado School of Mines Board of Trustees. The bonds mature from 2010 through 2024, with term bonds in 2029 and 2037.
Yields range from 1.68% with a 3% coupon in 2010 to 5.40% with a 5.25% coupon in 2037. The bonds are callable at par in 2018. The credit is rated Aa2 by Moody’s and A by Standard & Poor’s.
In economic data yesterday, initial jobless claims for the week ended March 21 were 652,000 after a revised 644,000 the previous week. Economists polled by Thomson Reuters had predicted 650,000 initial jobless claims.
The final fourth-quarter gross
domestic product dropped 6.3%, compared to a 6.2% decline predicted in the previous reading. Economists polled by Thomson Reuters had predicted a 6.2% decrease.
