Munis Mostly Unchanged With Firmer Tone

The municipal market was mostly unchanged yesterday, with a slightly firmer tone amid light to moderate secondary trading activity.

“I would say that the market is basically unchanged,” a trader in New York said. “There are not many bidders around right now. There is a better chance that it would go down than go up at the moment. There are a couple new issues, and they are expected to be cheaper than what is prevailing in the secondary.”

A trader in Los Angeles, though, said that there was “a better feeling in the marketplace.”

“We started to see some offerings get lifted up by customers early in the morning,” the trader said. “The bid side actually improved a basis point or two. I haven’t seen any new-issue balances clean up necessarily, but we have seen some better bids on high grades. It feels like the customers are willing to put a little bit of money to work.”

The Treasury market showed some gains yesterday. The benchmark 10-year note was quoted near the end of the session at 3.27% after opening at 3.30%. The 30-year bond was quoted near the end of the session at 4.19% after opening at 4.22%. The two-year note was quoted near the end of the session at 0.74% after opening at 0.75%.

The Municipal Market Data triple-A scale yielded 2.99% in 10 years and 3.78% in 20 years yesterday, matching Tuesday. The scale yielded 4.08% in 30 years yesterday, also matching Tuesday.

Tuesday’s triple-A muni scale in 10 years was at 90.3% of comparable Treasuries and 30-year munis were at 96.7%, according to MMD, while 30-year tax-exempt triple-A general obligation bonds were at 100.7% of the comparable London Interbank Offered Rate.

In the new-issue market yesterday, Jefferies & Co. priced $298 million of revenue refunding bonds for the Puerto Rico Highways and Transportation Authority, in three series.

Bonds from the $188.4 million Series AA-1 mature in 2026, yielding 4.95% priced at par. The bonds are backed by Assured Guaranty Municipal Corp., and are callable at par in 2020.

Bonds from the $65.3 million Series AA-2 mature in 2035, yielding 5.30% priced at par. The bonds are uninsured, and are callable at par in 2020.

Bonds from the $44.3 million Series H mature in 2035, yielding 5.45% priced at par. The bonds are uninsured and are callable at par in 2020.

The underlying credit is rated A2 by Moody’s Investors Service and BBB-plus by Standard & Poor’s.

Bank of America Merrill Lynch priced $201.1 million of refunding revenue bonds for Florida’s Orlando-Orange County Expressway Authority.

The bonds mature from 2011 through 2029, with yields ranging from 1.27% with a 4% coupon in 2012 to 4.75% with a 4.625% coupon in 2029. Bonds maturing in 2011 were decided via sealed bid.

The bonds, which are callable at par in 2020, are insured by Assured Guaranty, except bonds maturing in 2027, which are uninsured. The underlying credit is rated A by both Standard & Poor’s and Fitch Ratings.

Morgan Stanley priced $122.9 million of water revenue refunding bonds for the San Diego Public Facilities Financing Authority.

The bonds mature from 2022 through 2028, with yields ranging from 3.92% in 2022 to 4.39% in 2028, all with 5% coupons.

The bonds, which are callable at par in 2020, are rated Aa2 by Moody’s, AA-minus by Standard & Poor’s, and AA by Fitch.

Barclays Capital priced $79.5 million of tax and revenue anticipation notes for the San Francisco Unified School District.

The Trans mature in June 2011, yielding 0.43% with a 2% coupon.

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

In economic data released yesterday, the producer price index in May declined by 0.3%, led lower by a 1.5% decrease in energy prices.

However, core producer prices, which exclude food and energy costs, rose 0.2%, the seventh consecutive monthly increase.

Economists expected total producer prices to fall 0.5% and core prices to rise 0.1%, according to the median estimate from Thomson Reuters.

Producer prices fell an unrevised 0.1% in April, while the core rose 0.2%.

Groundbreaking for new home construction fell in May as housing starts dropped 10% to a seasonally adjusted annual rate of 593,000 units and building permits fell 5.9% to 574,000.

The May level of building permits was the lowest in a year. New housing starts declined to the lowest level since ­December.

Economists polled by Thomson Reuters expected 650,000 housing starts and 625,000 building permits, according to the median estimate.

Industrial production increased 1.2% in May, stronger than economists expected and the largest gain since August.

Capacity utilization increased to 74.7%, the highest level since August 2008. Utilization reached its low point for the current economic recession of 68.3% last June.

Economists expected industrial production to rise 0.7% and for capacity utilization to increase to 74.5%, according to the median estimate from Thomson Reuters.

Priti Patnaik contributed to this ­column.

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