Munis Flat as California Boosts Offering

California yesterday increased its general obligation bond sale to $2.5 billion, pricing it against a backdrop of a mostly unchanged municipal market.

JPMorgan priced the bonds, which were upsized from an originally planned $2 billion, following a two-day retail ­order period during which $1.38 billion was sold, or 69% of the original amount.

The bonds mature from 2011 through 2030, with term bonds in 2033, 2036, and 2040. Yields range from 1.17% with a 2% coupon in 2012 to 5.68% with a 5.5% coupon in 2040. Bonds maturing in 2011 were decided via sealed bid.

The bonds are callable at par in 2020. They are rated Baa1 by Moody’s Investors Service, A-minus by Standard & Poor’s, and BBB by Fitch Ratings.

Traders said tax-exempt yields were mostly flat, though a slightly firmer tone could still be felt in the secondary.

“It’s somewhat flat right now,” a trader in New York said. “There might be a little bit of a firmer tone, but right now we’re just pretty flat.”

“All the attention was focused on the new issues today, especially with the big Cal deal,” a trader in Los Angeles said. “Overall, we’re unchanged for the most part. Not really seeing a lot of movement.”

The Treasury market mostly showed some losses yesterday, though there were mild gains on the long end.

The benchmark 10-year note finished at 3.73% after opening at 3.72%. The yield on the two-year finished at 0.96% after opening at 0.90%. The yield on the 30-year bond finished at 4.67% after opening at 4.69%.

The Treasury Department today auctioned $13 billion of 30-year bonds with a 4 5/8% coupon at a 4.679% high yield, a price of 99.13. The bid-to-cover ratio was 2.89.

Federal Reserve banks also bought $153.8 million for their own account in exchange for maturing securities.

The Municipal Market Data triple-A scale yielded 2.80% in 10 years and 3.78% in 20 years yesterday, matching Wednesday’s levels. The scale yielded 4.15% in 30 years yesterday, also matching Wednesday’s level.

Wednesday’s triple-A muni scale in 10 years was at 75.3% of comparable Treasuries and 30-year munis were at 88.5%, according to MMD, while 30-year tax-exempt triple-A GOs were at 92.4% of the comparable London Interbank Offered Rate.

Elsewhere in the new-issue market yesterday, Goldman, Sachs & Co. priced $250 million of Michigan state aid GOs for Detroit.

The bonds mature from 2014 through 2024, with term bonds in 2030 and 2035. Yields range from 2.47% with a 5% coupon in 2014 to 5.375% with a 5.25% coupon in 2035.

Michael Pietronico, chief executive officer at Miller Tabak Asset Management, said the pricing, particularly the 4.25% yield in 10 years, “disappoints many who were sort of circling it and looking for a tremendous amount more yield because of [Detroit’s] fiscal situation.”

“But the backing of the state obviously is going to be what drives the success of this sale,” Pietronico said. “From our viewpoint, if you’re looking seriously at the deal, you’re looking at the creditworthiness of the state of Michigan, not so much at Detroit.”

The bonds, which are callable at par in 2020, are rated A1 by Moody’s and AA-minus by Standard & Poor’s.

Seattle competitively sold $201.9 million of tax-exempt and taxable bonds in two series, including $66.5 million of taxable Build America Bonds.

The BABs were sold to Citi, with a true interest cost of 4.65%. The bonds mature from 2018 through 2030, with yields ranging from 4.33% in 2021, or 2.81% after the 35% federal subsidy, to 5.23% in 2030, or 3.40% after the subsidy, all priced at par. Bonds maturing from 2018 through 2020 were not formally re-offered.

Seattle competitively sold $135.4 million of limited-tax GO improvement and refunding bonds to Bank of America Merrill Lynch, with a TIC of 3.12%.

The bonds mature from 2010 through 2031, with yields ranging from 0.35% with a 2.5% coupon in 2010 to 4.01% with a 4% coupon in 2028.

Bonds maturing from 2011 through 2020 and from 2029 through 2031 were not formally re-offered. The bonds are callable at par in 2020.

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

Bank of America Merrill priced $130.7 million of revenue bonds for the New Jersey Health Care Facilities Financing Authority.

The bonds mature from 2010 through 2025, with term bonds in 2029 and 2033. Yields range from 1.25% with a 2% coupon in 2010 to 5.00% with a 5.25% coupon in 2029. Bonds maturing in 2033 were not formally re-offered.

The bonds, which are callable at par in 2020, are rated A1 by Moody’s, A

by Standard & Poor’s, and A-plus by Fitch.

In economic data released yesterday, initial jobless claims decreased by 6,000 to 462,000 for the week ending March 6, in line with economists’ estimates.

Continuing claims rose to 4.558 million for the week ending Feb. 27 from 4.521 million in the previous week, which was revised higher from 4.5 million reported last week.

Initial claims for the week ending Feb. 27 were revised to 468,000 from the 469,000 reported last week.

Economists expected 460,000 initial jobless claims and 4.49 million ­continuing claims, according to the median estimate from Thomson Reuters.

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