Munis Firm a Tad With Muted Secondary

The municipal market was unchanged to slightly firmer yesterday amid light to moderate secondary trading activity.

“It’s a little bit firmer,” a veteran trader in New York said, noting that the change he observed was weighted to the long end of the market. “It’s a bit better here and there. Maybe one or two basis points, tops.”

A trader in Los Angeles also indicated that activity was muted.

“There’s just not a lot of interest out there,” the Los Angeles trader said. “We are a little bit better, particularly on the short end.”

The Treasury market showed some gains yesterday. The benchmark 10-year note was quoted near the end of the session at 2.96% after opening at 3.02%. The 30-year bond was quoted near the end of the session at 3.94% after opening at 4.00%. The two-year note was quoted near the end of the session at 0.61% after opening at 0.63%.

The Municipal Market Data triple-A scale yielded 2.81% in 10 years and 3.76% in 20 years yesterday, following levels of 2.85% and 3.76% Monday. The scale yielded 4.04% in 30 years yesterday, matching 4.05% Monday.

Monday’s triple-A muni scale in 10 years was at 94.1% of comparable Treasuries and 30-year munis were at 101.0%, according to MMD, while 30-year tax-exempt triple-A general obligation bonds were at 106.0% of the comparable London Interbank Offered Rate.

In the new-issue market yesterday, Goldman, Sachs & Co. priced $486.6 million of state revolving fund bonds for the Massachusetts Water Pollution Abatement Trust in multiple series, including $252.3 million of taxable Build America Bonds.

The BABs mature in 2040, and were priced to yield 125 basis points over the comparable Treasury yield.

The deal also contained two series of tax-exempt debt, the largest being the $191.9 million subseries 15A. Bonds from this series mature from 2011 through 2021, with yields ranging from 0.58% with a 2% coupon in 2012 to 3.13% with a 5% coupon in 2021. Bonds maturing in 2011 were decided via sealed bid. The bonds are callable at par in 2020.

Bonds from the $42.0 million Series A mature from 2014 through 2026, with yields ranging from 1.34% with a 3% coupon in 2014 to 3.63% with a 5% coupon in 2026. The bonds are callable at par in 2020.

The credit is rated triple-A by all three major ratings agencies.

The South Carolina Association of Governmental Organizations competitively sold $179.5 million of tax anticipation notes to Wells Fargo Securities with a net interest cost of 0.38%.

The Tans mature in April 2011 with a 2% coupon, and were not formally re-offered.

The credit is rated MIG-1 by Moody’s Investors Service.

Morgan Stanley priced $150 million of water facilities refunding revenue bonds for the New Jersey Economic Development Authority in three series.

Bonds from the $15.3 million Series A mature in 2023, yielding 4.45% priced at par. The bonds are callable at par in 2020.

Bonds from the $110.0 million Series B, which are subject to the alternative minimum tax, mature in 2034, yielding 5.60% priced at par. The bonds are callable at par in 2020.

Bonds from the $24.7 million Series C, which are subject to the alternative minimum tax, mature in 2023, yielding 5.10% priced at par. The bonds are callable at par in 2020.

The credit is rated A2 by Moody’s and A by Standard & Poor’s.

The Pennsylvania Higher Educational Facilities Authority competitively sold $137.8 million of revenue bonds to Jefferies & Co. with a true interest cost of 3.72%.

The bonds mature from 2011 through 2030, with a term bond in 2035. Yields range from 1.16% with a 5% coupon in 2013 to 4.26% with a 5% coupon in 2030. Bonds maturing in 2011, 2012, 2025, and 2035 were not formally re-offered.

The bonds, which are callable at par in 2020, are rated Aa2 by Moody’s and AA by Fitch Ratings.

JPMorgan priced $136.4 million of revenue refunding bonds for the Illinois Finance Authority.

The bonds mature from 2011 through 2025, with term bonds in 2029, 2030, and 2037. Yields range from 1.53% with a 3% coupon in 2012 to 5.17% with a 5% coupon in 2037. Bonds maturing in 2011 were decided via sealed bid.

The bonds are callable at par in 2020, except bonds maturing in 2025, which are callable at par in 2015. The credit is rated Aa2 by Moody’s and AA by Standard & Poor’s.

Also, Illinois decided to delay the $900 million taxable GO BAB sale it had originally scheduled for today. Citi is the lead manager.

The new sale date is July 14, according to state debt manager John Sinsheimer. He said Gov. Pat Quinn will be making announcements on the fiscal 2011 budget today.

“We felt the market should be given time to digest those announcements,” Sinsheimer said. “Given the holiday coming up next week, our lead bank Citi recommended that we wait.” 

Quinn is expected to make steep budget cuts after lawmakers adjourned without approving a $3.7 billion borrowing plan to cover the state’s pension payment.

In economic data released yesterday, the consumer confidence index dropped below economist estimates to 52.9 in June to post its first decline in four months.

Economists expected consumer confidence to edge down to 63.0, according to the median estimate from Thomson Reuters. The index for May was revised downward to 62.7 from 63.3 reported last month. The gauge has a baseline of 100, which reflects readings in 1985.

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