The municipal market was little changed yesterday amid fairly light secondary trading activity, as participants eased their way back from the long weekend.
“It’s very quiet, but it seems like retail is picking up a little, after a holiday weekend,” a trader in New York said. “Right now, there is very little going on. Possibly by tomorrow, things will pick up. People are looking to pick up some bonds, because it’s June and the redemption season is here. But it might take a couple of days. If the yields were about 50 basis points cheaper, I think you’d see a lot of people in the market.”
“After a three-day holiday, we don’t expect any miracles when we come back. It was a wash,” a trader in Los Angeles said. “Hopefully, tomorrow it will be better. I would say the market is going to be pretty steady for the rest of the week. It’s not going to be weak.”
“It’s very slow. I would say we were basically unchanged,” a second New York trader added. “We were hoping there would be some activity, but there wasn’t any on the muni side anyway. Right now, munis are not doing much of anything. I am hoping it will get active for the rest of week, but I don’t know if it will.”
The Treasury market was somewhat mixed yesterday. The benchmark 10-year Treasury note finished at 3.29% after opening at 3.28%. The 30-year Treasury bond finished at 4.19% after opening at 4.20%. The two-year Treasury note finished at 0.79% after opening at 0.77%.
The Municipal Market Data triple-A scale yielded 2.80% in 10 years and 3.66% in 20 years yesterday, following levels of 2.80% and 3.66% on Friday. The scale yielded 4.00% in 30 years yesterday, even with Friday.
Friday’s triple-A muni scale in 10 years was at 84.8% of comparable Treasuries and 30-year munis were at 94.8%, according to MMD, while 30-year tax-exempt triple-A general obligation bonds were at 99.3% of the comparable London Interbank Offered Rate.
On the heels of last week’s robust calendar, volume will be noticeably lighter this week. Only a handful of sizable deals will deliver an estimated $4 billion to the municipal market amid abbreviated trading due to the observance of Monday’s Memorial Day holiday, according to Ipreo LLC and The Bond Buyer.
By comparison, last week the market saw the arrival of a revised $7.69 billion, according to Thomson Reuters, $1.02 billion higher than the $6.67 billion originally anticipated.
In spite of the holiday-induced slowdown, the Metropolitan Government of Nashville and Davidson County hopes to capture investors’ attention with its $575 million sale of GO improvement and refunding bonds in what will be the week’s biggest offering.
The deal consists of $275 million of improvement and refunding GO bonds in Series 2010A; $250 million of improvement GOs that are designated as taxable, direct-pay BABs in Series 2010B; and $50 million of refunding GOs structured as traditional taxable bonds in Series 2010C.
Goldman, Sachs & Co. is planning to price the deal tomorrow following a retail order period today. The bonds are rated Aa1 by Moody’s Investors Service, AA by Standard & Poor’s, and AA-minus by Fitch Ratings.
A $315.3 million sale of revenue debt is also being planned by the California Health Facilities Financing Authority on behalf of Stanford Hospital and Clinics.
The sale, rated Aa3 by Moody’s, A-plus by Standard & Poor’s, and AA-minus by Fitch, is planned for pricing by Morgan Stanley tomorrow, following a retail order period today.
In the new-issue market yesterday, Harford County, Md., competitively sold $219.4 million of tax-exempt and taxable debt in three series, including $193.6 million over two series of taxable BABs.
Bonds from a $102.6 million series of taxable consolidated public improvement BABs were sold to Morgan Keegan & Co. with a true interest cost of 3.38%.
The bonds mature from 2021 through 2030, with yields ranging from 4.85% with a 5.125% coupon in 2024, or 3.15% after the 35% federal subsidy, to 5.41% with a 5.4% coupon in 2029, or 3.52% after the subsidy. Bonds maturing from 2021 through 2023, and in 2025 and 2030 were not formally re-offered. The bonds are callable at par in 2020.
Bonds from a $91 million series of taxable consolidated public improvement BABs were sold to JPMorgan and mature from 2011 through 2020. Pricing information on these bonds, which are not callable, was not available by press time.
Bonds from a $25.8 million series of tax-exempt refunding bonds were sold to JPMorgan with a TIC of 2.23%.
The bonds mature from 2011 through 2021, with yields ranging from 0.35% with a 2.5% coupon in 2011 to 2.97% with a 5% coupon in 2021.
Bonds maturing from 2015 through 2017 were not formally re-offered. The bonds are not callable.The credit is rated Aaa by Moody’s, AA-plus by Standard & Poor’s, and AAA by Fitch.
In economic data released yesterday, construction spending in April leaped 2.7%. Economists expected spending to be flat for the month, according to the median estimate from Thomson Reuters.
The Institute for Supply Management’s monthly report on business said the ISM index dipped to 59.7 in May from 60.4 in April. Economists polled by Thomson predicted the index would fall to 59.0.
Priti Patnaik contributed to this column.
