Munis Weaker Amid 'Rate Fatigue’

The municipal market was weaker by about three to five basis points overall yesterday amid light to moderate secondary trading.

“There is some rate fatigue,” a trader in Los Angeles said. “The market has a much weaker tone today than in the past few days. It just basically looks like a mild correction. There was a cut Wednesday, there was a cut about five basis points or so today. We are seeing bonds trading from anywhere between five to 10 basis points cheaper than Wednesday. So it’s simply an adjustment and a correction in the muni market.”

The Treasury market showed losses yesterday. The benchmark 10-year Treasury note was quoted near the end of the session at 3.32%, after opening at 3.17%.

The 30-year Treasury bond was quoted near the end of the session at 4.23%, after opening at 4.12%.

The two-year Treasury note was quoted near the end of the session at 0.79%, after opening at 0.72%.

The Municipal Market Data triple-A scale yielded 2.93% in 10 years and 3.73% in 20 years yesterday, following levels of 2.85% and 3.69% Wednesday. The scale yielded 4.04% in 30 years yesterday, following 4.00% Wednesday.

Wednesday’s triple-A muni scale in 10 years was at 89.3% 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 101.5% of the comparable London Interbank Offered Rate.

In the new-issue market yesterday, Morgan Stanley priced $380 million of taxable and tax-exempt GOs for Cook County, Ill., in two series.

Bonds from the $300 million tax-exempt Series A mature in 2022, 2023, 2025, and 2033, with yields ranging from 4.10% with a 5.25% coupon in 2022 to 4.71% with a 5.25% coupon in 2033. The bonds are callable at par in 2020.

Bonds from the $80 million taxable Series C mature from 2011 through 2013, yielding 1.43%, 1.958%, and 2.503%, all priced at par. The bonds are not callable, and were priced to yield between 120 and 130 basis points over the comparable Treasury yields.

The bonds, which are callable at par in 2020, are rated Aa2 by Moody’s Investors Service and AA by both Standard & Poor’s and Fitch Ratings.

Bank of America Merrill Lynch priced $280 million of student loan revenue bonds for the New Jersey Higher Education Student Assistance Authority.

The bonds mature from 2012 through 2030, and in 2036. Yields range from 1.72% with a 3% coupon in 2012 to 5.08% with a 5% coupon in 2036.

The bonds, which are callable at par in 2020, are rated Aa3 by Moody’s and A-plus by Fitch.

RBC Capital Markets priced $211.4 million of revenue bonds for the New Jersey Economic Development Authority.

The bonds mature from 2012 through 2021, with term bonds in 2025, 2031, and 2042. Yields range from 2.43% with a 4% coupon in 2012 to 5.93% with a 5.875% coupon in 2042.

The bonds, which are callable at par in 2020, are rated Baa3 by Moody’s.

Bank of America Merrill Lynch priced $124.3 million of taxable certificates of participation for the Miami-Dade County School Board in three series.

Bonds from the $46.3 million series mature in 2027, yielding 6.485% priced at par. The bonds were priced to yield 230 basis points over the comparable Treasury yield and are not callable.

Bonds from the $50 million series mature in 2027 and were not formally re-offered.

Bonds from the $28 million series of taxable BABs mature in 2030 and 2032, yielding 6.835% and 6.935%, or 4.44% and 4.51% after the 35% federal subsidy.

The bonds were priced to yield 265 and 275 basis points over the comparable Treasury yield. The bonds are callable at par in 2020.

The credit is rated A1 by Moody’s and A by Standard & Poor’s.

Morgan Keegan & Co. priced $118.9 million of auxiliary revenue and refunding bonds for the Louisiana State University Board of Supervisors in two series.

Bonds from the $87.2 million Series A mature from 2010 through 2021, and in 2023 and 2025, with term bonds in 2029, 2032, and 2035.

Yields range from 0.50% with a 2% coupon in 2010 to 4.85% with a 5% coupon in 2040. The bonds are callable at par in 2020.

Bonds from the $31.7 million Series B mature from 2012 through 2021, and in 2023 and 2025, with term bonds in 2029, 2032, 2035, and 2040.

Yields range from 1.15% with a 2% coupon in 2012 to 4.85% with a  4.75% coupon in 2040. The bonds are callable at par in 2020.

The credit is rated A1 by Moody’s and AA-minus by Fitch.

Piper Jaffray & Co. priced $91 million of health care revenue bonds for the Iowa Finance Authority.

The bonds mature from 2011 through 2021, with a term bond in 2026. Yields range from 1.81% with a 4% coupon in 2012 to 5.06% with a 5% coupon in 2026. Bonds maturing in 2011 were decided via sealed bid.

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

In economic data released yesterday, initial jobless claims fell to 453,000 for the week ending June 5, their third straight decrease.

Continuing claims fell to 4.462 million for the week ending May 29.

Economists expected 448,000 initial claims and 4.640 million continuing claims, according to the median estimate from Thomson Reuters.

Priti Patnaik contributed to this column.

For reprint and licensing requests for this article, click here.
MORE FROM BOND BUYER