Munis a Bit Firmer; Wake County Holds Off

The municipal market was somewhat firmer yesterday amid light to moderate secondary trading activity as Wake County, N.C., postponed the week’s largest scheduled new issuance and the Massachusetts Water Resources Authority successfully priced another hefty offering.

Traders said tax-exempt yields were lower by one to two basis points overall, with gains extending to three or four basis points in spots.

“There’s a bit of strength out there,” a trader in New York said. “There isn’t a ton of movement that I’m seeing, but it’s a little bit firmer. We’re probably stronger a basis point, maybe two, on the whole. Could even be a little more in spots, maybe a little less.”

“We’re getting a bit of a push from Treasuries,” a trader in Los Angeles said. “Treasuries are rallying some with the Greece situation, and we’d been carrying a bit of a firmer tone regardless, so we’re just following right along. We could be as much as three or four basis points better, depending on what you’re trading.”

The Treasury market rallied yesterday, buoyed by Standard & Poor’s cutting the debt ratings of Greece and Portugal, including slashing Greece’s debt to junk status.

The benchmark 10-year note was quoted near the end of the session with a yield of 3.69% after opening at 3.81%.

The yield on the two-year was quoted near the end of the session at 0.97% after opening at 1.05%.

The yield on the 30-year bond was quoted near the end of the session at 4.58% after opening at 4.67%.

The Treasury Department yesterday auctioned $44 billion of two-year notes with a 1% coupon at a 1.024% yield and a price of 99.95.

The bid-to-cover ratio was 3.03. The Federal Reserve banks also bought $938.6 million for their own account in exchange for maturing securities.

In the new-issue market yesterday, Wake County postponed its $421.7 million sale of general obligation refunding bonds, which was to be the largest deal in the primary market this week.

The issuer had been expected to competitively price the deal today, which would have been its largest refunding deal on record.

According to the state treasurer’s department, no new date for the sale has been set. Details on why the deal was postponed were unavailable by press time.

Wake County is rated triple-A by Moody’s Investors Service, Standard & Poor’s, and Fitch Ratings.

The county has outstanding $1.79 billion of GO debt and $303 million of limited obligation bonds.

Citi priced $283 million of general revenue bonds for the Massachusetts Water Resources Authority in two series.

Bonds from the $100 million new-money Series A mature from 2015 through 2030, with term bonds in 2035 and 2040.

Bonds form the $183.1 million refunding Series B mature from 2014 through 2019, in 2021, and from 2025 through 2032.

Yields across both series range from a low of 1.90% with a 3% coupon in 2015 to a high of 4.33% with a 5% coupon in 2040.

All bonds are callable at par in 2020, and are rated Aa1 by Moody’s, AA-plus by Standard & Poor’s, and AA by Fitch.

In February, JPMorgan priced $384 million of general revenue bonds for the MWRA in two series. Yields from a $98 million series range from 1.33% with a 4% coupon in 2011 to 5.09% with a 5% coupon in 2039.

Yields from the $285 million series range from 1.33% with a 3% coupon in 2011 to 5.09% with a 5% coupon in 2039.

Goldman, Sachs & Co. priced for retail investors $185 million of revenue bonds for the Connecticut Health and Educational Facilities Authority, on behalf of Wesleyan University.

Bonds priced during the retail order period mature in 2023, 2025, 2030, 2035, and 2039, yielding 4.10% with a 4% coupon, and 3.87%, 4.24%, 4.35%, and 4.40% with 5% coupons, respectively.

The bonds are rated Aa3 by Moody’s and AA by Standard & Poor’s.

The Municipal Market Data triple-A scale yielded 2.93% in 10 years and 3.79% in 20 years yesterday, compared with Monday’s levels of 2.97% and 3.82%. The scale yielded 4.06% in 30 years yesterday, following 4.11% on Monday.

Friday’s triple-A muni scale in 10 years was at 78.0% of comparable Treasuries and 30-year munis were at 88.2%, according to MMD, while 30-year tax-exempt triple-A GOs were at 91.7% of the comparable London Interbank Offered Rate.

In economic data released yesterday, the consumer confidence index jumped to 57.9 in April from a downwardly revised 52.3 last month. Economists polled by Thomson Reuters predicted the index would be 71.0.

Today, the Federal Open Market Committee will conclude its monetary policy meeting.

In a report, Maxwell Bublitz, chief strategist at SCM Advisors, wrote: “The Fed has been operating under a framework consisting of two sets of policy tools, one set of liquidity measures and one set of monetary policy measures.

“Most of their recent activity has been focused on unwinding the emergency liquidity measures, and officials have gone out of their way to suggest these moves, including the discount rate hike, don’t signal anything regarding monetary policy,” Bublitz wrote. “Easy money in the form of the Fed’s near-zero interest rate and quantitative easing policies helped break the downward spiral in asset values and economic activity in March of 2009, and we have gotten some clues from Fed officials recently on their thoughts on exiting those strategies.

“Nevertheless, we don’t expect the Fed to shift from its near-zero interest rate until late this year at the earliest,” he wrote, “although we wouldn’t be surprised at more hikes in the discount rate.”

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