The municipal market was unchanged with a slightly firmer tone yesterday, amid light to moderate secondary trading activity, as San Francisco’s Bay Area Toll Authority came to market with $1.5 billion of taxable Build America Bonds.
“The market is somewhat firm, but sideways, neither up nor down,” a trader in New York said.
“Bonds are getting distributed,” the trader said. “There’s not a ton of bonds around. The scale may be up a basis point. The outlook for next week is in the doldrums. There is a lot of reinvestment money coming in, so that’s on the radar.”
“The market still feels strong — there has been a lot of interest as we have seen all week with the strong retail demand,” a trader in San Francisco said.
“There has been good reception in the primary market for new issues,” the trader said. “It seems to be pretty good demand for the secondary.”
In the new-issue market yesterday, Bank of America Merrill Lynch priced $1.5 billion of taxable subordinate toll bridge revenue BABs for the Bay Area Toll Authority.
The BATA bonds mature in 2030, 2040, and 2050, yielding 6.793%, 6.918%, and 7.043%, or 4.42%, 4.50%, and 4.58% after the 35% federal subsidy, all priced at par.
The bonds were priced to yield 275, 287.5, and 300 basis points over the comparable Treasury yield. They have a make-whole call of Treasuries plus 45 basis points.
The credit is rated A1 by Moody’s Investors Service and A-plus by Standard & Poor’s.
The Treasury market showed some losses yesterday.
The benchmark 10-year note finished at 3.12% after also opening at 3.12%. The 30-year bond finished at 4.08% after opening at 4.07%. The two-year note finished at 0.68% after also opening at 0.68%.
The Municipal Market Data triple-A scale yielded 2.92% in 10 years and 3.76% in 20 years yesterday, following levels of 2.94% and 3.76% Wednesday.
The scale yielded 4.05% in 30 years yesterday, matching Wednesday.
Wednesday’s triple-A muni scale in 10 years was at 94.8% of comparable
Treasuries and 30-year munis were at 100.0%, according to MMD, while 30-year tax-exempt triple-A general obligation bonds were at 105.2% of the comparable London Interbank Offered Rate.
Elsewhere in the new-issue market yesterday, Morgan Stanley priced $214.7 million of bonds for Broward County, Fla., in two series, including $70 million of taxable BABs.
The BABs mature in 2025 and 2030, yielding 5.764% and 6.206%, or 3.75% and 4.03% after the 35% federal subsidy, both priced at par.
The bonds, which are callable at par in 2020, are subject to a make-whole redemption at Treasuries plus 35 basis points prior to the call.
Bonds from a $48.8 million series of taxable recovery zone economic development bonds mature in 2040, yielding 6.556%.
The bonds, which are callable at par in 2020, are subject to a make-whole redemption at Treasuries plus 35 basis points prior to the call.
Bonds from a $95.9 million series of tax-exempt one-half-cent sales tax revenue bonds mature from 2011 through 2020, with a term bond in 2036.
Yields range from 1.00% with a 2.5% coupon in 2012 to 4.90% with a 5.25% coupon in 2036.
Bonds maturing in 2011 were not formally re-offered.
The bonds are callable at par in 2020.
The credit is rated Aa2 by Moody’s and AA-plus by both Standard & Poor’s and Fitch Ratings.
Union County, N.J., competitively sold $182.7 million of bond anticipation notes to various bidders.
The Bans, which mature in July 2011, were mostly sold to Wells Fargo Securities in the amount of $132.7 million, with an effective rate of 0.49% and a 2% coupon.
The remaining $50 million was sold to Beneficial Bank, with an effective rate of 0.46% and a 1.25% coupon.
In economic data released yesterday, initial jobless claims decreased 19,000 to 457,000 for the week ending June 19, to a level lower than economists’ estimates and hitting the lowest level since the first week of May.
Continuing claims fell to 4.548 million for the week ending June 12.
Economists expected 464,000 initial jobless claims and 4.560 million continuing claims, according to the median estimate from Thomson Reuters.
New orders of durable goods fell 1.1% in May, a decline that matched economists’ estimates and was driven mostly by a decline in orders of transportation equipment.
The figure followed a revised 3.0% gain in April, originally reported as a 2.9% jump.
Excluding transportation, May durable goods orders rose 0.9%, following a revised 0.8% decline in April that Commerce originally reported as a 1.0% drop.
New orders for transportation equipment fell 6.9% after surging a revised 15.4% the previous month, originally reported as a 16.1% rise.
New nondefense aircraft orders, a volatile category, dropped 29.6%, leading to the transportation orders decline. The category had spiked 215.7% the previous month.
Economists expected durable goods would fall 1.1% in May and goods excluding transportation would increase 1.0%, according to the median estimate from Thomson Reuters.
Priti Patnaik contributed to this column.
