Munis 'Terrible,’ But There’s Always Tomorrow

The municipal market was mostly unchanged yesterday amid continued fairly light secondary trading activity, as traders struggled to find liquidity.

“The muni market is terrible right now,” a veteran trader in New York said. “There is very little turnover. The actual ability to sell bonds is very limited. You can sell bigger pieces, but away from that, it is difficult. The market is just not doing anything. It is extremely tough to trade right now. I don’t think it will improve for a couple of weeks. It will probably take a quick drop in yields to spur interest, maybe something like 25 to 30 basis points.”

A retail trader in Los Angeles said his sense is that the market is poised for improvement.

“Bonds in general were definitely outperforming Treasuries, which were off a little bit,” the retail trader said. “I would say we were flat to possibly even slightly improved. It seems like a lot of paper in the secondary market is starting to dry up a little bit. Assuming there is no huge issuance tomorrow by way of surprise, it should improve.”

The Treasury market was somewhat mixed yesterday. The benchmark 10-year Treasury note finished at 3.18% after opening at 3.14%. The 30-year Treasury bond was quoted near the end of the session at 4.10% after opening at 4.13%. The two-year Treasury note finished at 0.75% after opening at 0.71%.

The Municipal Market Data triple-A scale yielded 2.81% in 10 years and 3.69% in 20 years yesterday, following levels of 2.81% and 3.68% Monday. The scale yielded 4.00% in 30 years yesterday, matching Monday.

Monday’s triple-A muni scale in 10 years was at 88.6% of comparable Treasuries and 30-year munis were at 97.1%, according to MMD, while 30-year tax-exempt triple-A general obligation bonds were at 101.0% of the comparable London Interbank Offered Rate.

In the new-issue market yesterday, JPMorgan priced for retail investors $756.2 million of general obligation bonds for Connecticut in two series, ahead of institutional pricing today.

Bonds from the $200 million Series B mature in 2011 and from 2014 through 2018. Yields range from 1.54% with a 2% coupon in 2014 to 2.71% with a 3% coupon in 2018. Bonds maturing in 2011 will be decided via sealed bid. The bonds are not callable.

Bonds from the $556.2 million Series C mature from 2012 through 2021, with yields ranging from 0.80% with a 2% coupon in 2012 to 3.19% with a 5% coupon in 2021. The bonds are callable at par in 2019.

The credit is rated Aa2 by Moody’s Investors Service and AA by Standard & Poor’s and Fitch Ratings.

The Florida Department of Transportation competitively sold $251.4 million of turnpike revenue bonds to Wells Fargo Securities.

The bonds mature from 2011 through 2040. Yields range from 1.75% with a 5% coupon in 2014 to 4.70% with a 5% coupon in 2040. Bonds maturing from 2011 through 2013, and in 2015, 2020, and 2031, were not formally re-offered.

The bonds, which are callable at 101 in 2020, declining to par in 2021, are rated Aa3 by Moody’s and AA-minus by Standard & Poor’s and Fitch.

Nassau County, N.Y., competitively sold $210 million of revenue anticipation notes over two series to various bidders.

Of the $130 million Series A, $80 million was sold to Citi in four tranches, the largest being $50 million with an effective rate of 0.43%. Citi also won three $10 million pieces of the deal, with effective rates of 0.40%, 0.41%, and 0.42%.

Additionally, $45 million was sold to Janney Montgomery Scott with an effective rate of 0.44%. The remaining $5 million was sold to Loop Capital Markets with an effective rate of 0.42%.

The entire $80 million Series B was sold to Janney Montgomery in two $40 million pieces with effective rates of 0.51% and 0.48%.

The credit is rated MIG-1 by Moody’s, SP-1-plus by Standard & Poor’s, and F1-plus by Fitch.

Southwest Securities priced $49.5 million of general obligation refunding bonds for the Dallas County Community College District.

The bonds mature from 2011 through 2025, with yields ranging from 0.65% with a 2% coupon in 2011 to 3.58% with a 5% coupon in 2025.

The bonds, which are callable at par in 2020, are rated triple-A by all three major agencies.

In addition, Goldman, Sachs & Co. priced $40 million of home ownership revenue bonds for the South Carolina State Housing Finance and Development Authority.

The bonds mature from 2011 through 2021, with term bonds in 2024 and 2028. Yields range from 0.70% priced at par in 2011 to 3.40% with a 5% coupon in 2029.

The bonds, which are callable at par in 2020, are rated Aaa by Moody’s.

Trades reported by the Municipal Securities Rulemaking Board yesterday showed little movement. A dealer bought from a customer taxable New York Metropolitan Transportation Authority Build America Bonds 5.871s of 2039 at 6.02%, even with where they were sold Monday. Bonds from an interdealer trade of Illinois 5s of 2023 at 4.30%, even with where they were sold Monday.

Bonds from an interdealer trade of Washington State 5s of 2025 yielded 3.59%, up one basis point from where they were sold Monday. A dealer bought from a customer taxable Texas BABs 5.517s of 2039 at 5.10%, down one basis point from where they were sold Monday.

Bonds from an interdealer trade of California 5.25s of 2038 yielded 5.25%, even with where they were sold Monday. A dealer sold to a customer New Jersey Economic Development Authority 5.75s of 2031 at 5.78%, even with where they were sold Monday.

A dealer sold to a customer King County, Wash., 5.125s of 2033 at 4.33%, down one basis point from where they were sold Monday. A dealer sold to a customer Omaha Public Facilities Corp., Neb., 4.375s of 2036 at 4.46%, up one basis point from where they were sold Monday.

The economic calendar was light yesterday.

Priti Patnaik contributed to this ­column.

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