The municipal market firmed slightly yet again Tuesday amid light to moderate secondary trading, with 10-year yields dipping to yet another all-time low, maintaining firmness despite a Treasury sell-off.
"We just keep firming up no matter what, it seems," a trader in New York said. "Yesterday, Treasuries rallied and we went up a couple of basis points. Today, Treasuries are backtracking and we're up a couple of basis points. We just keep rolling."
The Municipal Market Data triple-A scale yielded a record-low 2.36% in 10 years and 3.47% in 20 years Tuesday, following levels of 2.39% and 3.50% on Monday. The scale yielded 3.83% in 30 years Tuesday, following Monday's 3.84%.
While 10-year munis set historical lows, 20- and 30-year tax-exempts are also close to making history. The 20-year yield of 3.47% is just four basis points away from the low of 3.43% set Oct. 2, 2009. Additionally, the 30-year yield of 3.83% is just two basis points higher than the all-time low of 3.81%, which was also set Oct. 2, 2009.
Monday's triple-A muni scale in 10 years was at 89.9% of comparable Treasuries and 30-year munis were at 99.7%, according to MMD, while 30-year tax-exempt triple-A general obligation bonds were at 111.9% of the comparable London Interbank Offered Rate.
The Treasury market showed losses Tuesday, giving back much of Monday's gains. The benchmark 10-year note was quoted near the end of the session at 2.63% after opening at 2.56%. The 30-year bond was quoted near the end of the session at 3.76% after opening at 3.71%. The two-year note was quoted near the end of the session at 0.51% after opening at 0.48%.
In the new-issue market Tuesday, North Carolina competitively sold $494.7 million of GO refunding bonds to Bank of America Merrill Lynch.
The bonds have natural triple-A ratings from all three major rating agencies and the deal is structured to mature from 2011 to 2019 — all with 5% coupons and a true interest cost of 1.70%. Bonds maturing in 2018 yield 1.94%. All the remaining bonds were sold but not available.
Barclays Capital priced $325 million of taxable Build America Bonds for the Kansas Department of Transportation. The bonds mature in 2035, yielding 4.596% priced at par, or 2.99% after the 35% federal subsidy.
They are priced to yield 83 basis points over the 30-year Treasury yield and contain a make-whole call at Treasuries plus 15 basis points.
The credit is rated Aa1 by Moody's Investors Service, AAA by Standard & Poor's, and AA-plus by Fitch Ratings.
The Florida State Board of Education competitively sold $179.9 million of public education capital outlay refunding bonds to JPMorgan with a TIC of 3.40%. The bonds mature from 2011 through 2031, with yields ranging from 1.36% with a 5% coupon in 2015 to 3.80% with a 4.75% coupon in 2030.
Bonds maturing from 2011 through 2014 and in 2031 were not formally reoffered. The bonds are callable at 101 in 2020, declining to par in 2021, and are rated Aa1 by Moody's and AAA by Fitch.
Wichita, Kan., competitively sold $140 million of GO temporary notes to JPMorgan with a TIC of 0.41%.
The notes mature in September 2011 with a 0.45% coupon and were not formally reoffered. The credit is rated MIG-1 by Moody's and SP-1-plus by Standard & Poor's.
In economic data released Tuesday, producer prices rose 0.2% in July. Core producer prices, excluding food and energy costs, increased 0.3%.
The headline 0.2% rise matched economists' expectations while the core prices increase compared to a 0.1% uptick predicted by the median estimate from Thomson Reuters.
U.S. housing starts increased to 546,000 at a seasonally adjusted annual rate in July as building permits fell to 565,000. Housing starts for June were revised lower to 537,000 from 549,000.
June building permits were also revised lower to 583,000 from 586,000 reported last month. Economists polled by Thomson Reuters expected 560,000 housing starts and 580,000 building permits in July, according to the median estimate from Thomson Reuters.
Industrial production increased 1.0% in July, while industrial capacity utilization increased to 74.8% in July.
June's industrial production figure was revised lower, swinging to a 0.1% decline. Capacity utilization in June was unrevised at 74.1%.
Economists polled by Thomson Reuters expected industrial production would increase 0.5% and capacity utilization would increase to 74.5%.
