The municipal market ended unchanged overall yesterday, having posted spotty gains of one or two basis points in the course of the session.
Activity in the secondary was light to moderate.
“It seems like people are waiting to see how the big new issues price this week,” a trader in San Francisco said. “That will make it a little bit easier for everybody.”
Traders reported range-bound trading that lacked much zest.
“The market is trading to its needs,” a trader in New York said. “If you need it, it will trade. If you don’t, it won’t.”
Treasury yields headed lower even as the Dow Jones industrial average rose and ended above the 11,000 mark for the first time in 18 months.
Traders said they had expected Treasury yields to move higher, reflecting greater certainty in the market, on reports of an agreement by European nations to provide loans to Greece. That anticipated move to higher yields in Treasuries didn’t eventuate.
“I wouldn’t have thought it, but the Treasury market has a bid to it,” the New York trader said.
The benchmark 10-year note was quoted near the end of the session with a yield of 3.84%, down from 3.88% at the open. The yield on the two-year ended at 1.04%, down from 1.08% at the open. The yield on the 30-year bond was quoted near the end of the session at 4.70%, after opening at 4.74%.
Among a slew of economic data this week, reports that will garner close attention are the March consumer price index and March retail sales, both
due tomorrow.
Mike Moran, chief economist with Daiwa Capital Markets America, said given that inflation has been well contained, he expects CPI to rise 0.1% while a retail sales forecast rise of 0.6% reflects lack of overall improvement in the job market.
“I don’t think the labor market is strong enough yet to generate a consistent story in consumer spending,” he said.
Ray Stone, economist with Stone & McCarthy Research, said the underlying story of retail sales remains the same — a solid monthly gain and a solid quarterly gain, which indicate recovery in the economy.
“It looks pretty upbeat,” he said. “We’re moving in the right direction. The question is, 'How fast do we get there?’ It’s going to be a gradual recovery.”
Stone anticipates a 0.5% rise in retail sales overall and a 0.2% gain excluding autos.
In a light new-issue market, RBC Capital Markets priced and repriced $24.4 million of bonds for Bryan, Tex.
The issue consists of $13.7 million of combination tax and revenue certificates of obligation and $10.6 million of general obligation refunding bonds.
The certificates were priced to yield from 0.65% with a 2.0% coupon in 2011 to 4.55% with a 4.375% coupon in 2030. At the repricing, yields were lowered by one basis point in 2024 and 2027 and by two basis points in 2028 and 2030.
The GO refunding bonds were priced to yield from 0.5% with a 2.0% coupon in 2010 to 3.90% with a 4.0% coupon in 2021.
Both tranches carry ratings of Aa3 from Moody’s Investors Service and AA from Standard & Poor’s.
Meanwhile, the Municipal Market Data triple-A scale yielded 3.11% in 10 years, down from 3.14% Friday. The MMD scale yielded 3.85% in 20 years and 4.17% in 30 years, unchanged from Friday.
Reflecting on where the best values are currently to be found in the muni market, George Friedlander, managing director with Morgan Stanley Smith Barney, said the 8-13 year maturity range is the place to look.
“With little supply left on the long end, there are attractive values on some medium-quality paper, including the strongest health care credits, but the long end has been extremely resilient,” he wrote in a weekly report. “Most of the paper in that maturity range continues to come as taxable Build America Bonds.”
In other new issues this week, Chicago will come to market with a $1.04 billion offering of revenue bonds on behalf of O’Hare International Airport. The offering, which is slated to price tomorrow by Bank of America Merrill Lynch, consists of six different series, the largest of which is comprised of $557.2 million of general airport third-lien taxable BABs.
In the week’s second-largest deal, the Nashville and Davidson County Metropolitan Government Convention Center Authority is gearing up to price $633.3 million for a new convention facility. The deal consists of $604.9 million of taxable BABs, split into two series — $413.8 million of subordinate-lien tourism tax revenue bonds, and $191.1 million of senior-lien revenue bonds.
In another sizable offering, Allen County, Ohio, will issue $450 million of hospital facilities revenue bonds on behalf of Catholic Health Partners. The two-pronged tax-exempt deal is being managed and priced by JPMorgan Thursday, following a retail order period Wednesday.
The Troy, N.Y., Capital Resources Corp. is planning to issue $366.3 million of revenue refunding bonds tomorrow on behalf of Rensselaer Polytechnic Institute. The deal is being senior-managed by Morgan Stanley. Meanwhile, RPI itself will issue $200 million of taxable bonds structured as a 10-year bullet maturity in a deal to be priced tomorrow by JPMorgan.
A $450 million offering of lease revenue bonds from the California State Public Works Board is expected to be priced by RBC Capital Markets tomorrow following a retail order period today.
Finally, the Pennsylvania Higher Education Facilities Authority will issue $186 million of revenue bonds on behalf of Temple University. The latter deal will be senior-managed by Barclays Capital, and is scheduled to price tomorrow.
