The municipal market was unchanged with a firmer tone yesterday amid light to moderate secondary trading activity.
“We’re fairly flat, but there’s maybe a little bit of a firmer tone,” a trader in New York said. “It’s somewhat quiet still, but we’re flat to maybe better by a basis point or two in spots.”
“We are trying to do a little bit better,” a trader in Los Angeles said. “Some people are trying to poke their heads up a little bit. New issues are struggling in the market, but people are looking at the secondary market with adjusted prices. I would say we are probably unchanged and hoping to look for some activity.”
The Treasury market showed gains yesterday. The benchmark 10-year note was quoted near the end of the session at 3.20% after opening at 3.27%. The 30-year bond was quoted near the end of the session at 4.13% after opening at 4.18%. The two-year note was quoted near the end of the session at 0.71% after opening at 0.72%.
The Municipal Market Data triple-A scale yielded 2.97% in 10 years and 3.78% in 20 years yesterday, following levels of 2.99% and 3.78% Wednesday. The scale yielded 4.08% in 30 years yesterday, matching Wednesday.
Wednesday’s triple-A muni scale in 10 years was at 91.7% of comparable Treasuries and 30-year munis were at 97.6%, according to MMD, while 30-year tax-exempt triple-A general obligation bonds were at 102.3% of the comparable London Interbank Offered Rate.
In the new-issue market yesterday, Goldman, Sachs & Co. priced $340.9 million of bonds for the Kentucky Turnpike Authority, including $187.6 million of taxable Build America Bonds.
Bonds from the $187.6 million BAB series mature in 2025 and 2030, yielding 5.24%, or 3.41% after the 35% federal subsidy, to 5.72%, or 3.72% after the subsidy, both priced at par. The bonds were priced to yield 205 and 160 basis points over the comparable Treasury yields, respectively.
Bonds maturing in 2025 are subject to a make-whole call at Treasuries plus 35 basis points. Bonds maturing in 2030 are subject to a make-whole call at Treasuries plus 25 basis points.
Bonds from the $153.3 million series of tax-exempt economic development road revenue and revenue refunding bonds mature from 2013 through 2020, with yields ranging from 1.20% with a 2.5% coupon in 2013 to 3.49% with a 3.375% coupon in 2020. The bonds are not callable.
The credit is rated Aa2 by Moody’s Investors Service, AA-plus by Standard & Poor’s, and AA-minus by Fitch Ratings.
Illinois competitively sold $300 million of taxable GO BABs to Citi with a true interest cost of 4.39%.
The bonds mature from 2011 through 2019, with term bonds in 2021, 2025, and 2035. Yields range from 3.40% priced at par in 2013, or 2.12% after the 35% federal subsidy, to 7.10% priced at par in 2035, or 4.62% after the subsidy. Bonds maturing in 2011, 2012, and 2025 were not formally re-offered.
The credit is rated A1 by Moody’s, A-plus by Standard & Poor’s, and A by Fitch.
This comes on the heels of the state’s $455.1 million issue of sales tax revenue Build Illinois Bonds. Cabrera Capital Markets priced the deal late Wednesday.
The bonds mature from 2011 through 2021, with yields ranging from 0.64% with a 3% coupon in 2011 to 4.13% with a 4% coupon in 2021.
These bonds are rated AAA by Standard & Poor’s and AA-plus by Fitch. They are callable at par in 2020.
Elsewhere among new issues yesterday, Bank of America Merrill Lynch priced $162.9 million of revenue refunding bonds for the Illinois Finance Authority.
The bonds mature in 2039, yielding 6.20% with a 6% coupon.
The bonds, which are callable at par in 2020, are rated A3 by Moody’s and A by both Standard & Poor’s and Fitch.
Berkeley, Calif., competitively sold $50 million of tax and revenue anticipation notes to Morgan Stanley with a net interest cost of 0.42%.
The Trans mature in June 2011 with a 2% coupon. They were not formally re-offered.
The credit is rated MIG-1 by Moody’s.
In economic data released yesterday, initial jobless claims increased to 472,000 for the week ending June 12, the second straight weekly increase and the highest level in a month.
Continuing claims increased to 4.571 million for the week ending June 5.
Economists expected 450,000 initial claims and 4.455 million continuing claims, according to the median estimate from Thomson Reuters.
The composite index of leading economic indicators gained 0.4% in May. LEI was revised to flat in April, originally reported as a 0.1% dip.
Economists polled by Thomson Reuters predicted LEI would be up 0.2% in the month.
The region’s manufacturing sector continued to improve but at a slower pace, as the general business conditions index slumped to 8.0 in June from 21.4 in May, this month’s Federal Reserve Bank of Philadelphia Report on Business indicates.
Economists surveyed by Thomson Reuters predicted a reading of 22.0 for the index.
Priti Patnaik contributed to this column.
