The municipal market was slightly weaker Thursday as the New York City Municipal Water Finance Authority came to market with $750 million of taxable Build America Bonds.
Traders said tax-exempt yields rose one to three basis points in spots on a day marked by light to moderate secondary trading.
“We’re probably down anywhere from one to three basis points, just pretty much weakening as you go out longer,” a trader in Los Angeles said. “As we’ve been weakening recently, the long end has held in pretty well, but I think we’re definitely down.”
In the new-issue market, Barclays Capital priced $750 million of taxable BABs for the New York City MWFA.
The BABs mature in 2041 and 2043 and were priced to yield 190 and 155 basis points over the comparable Treasury yield.
Bonds maturing in 2041 are callable at par in 2020. Bonds maturing in 2043 contain a make-whole call at Treasuries plus 40 basis points.
The credit is rated Aa2 by Moody’s Investors Service and AA-plus by Standard & Poor’s and Fitch Ratings.
The Municipal Market Data triple-A scale yielded 2.40% in 10 years and 3.34% in 20 years Thursday, following 2.39% and 3.33% Wednesday.
The scale yielded 3.76% in 30 years, up from 3.73%.
“We’re definitely down a little bit,” a trader in New York said. “I don’t think it’s more than two or three basis points on the whole, maybe closer to one or two, but we’re definitely cheapening up a bit again today.”
In nine of the past 11 sessions, at least one of the 10-, 20-, or 30-year yields have risen. Before the recent sell-off, yields dropped to all-time lows on 10-year munis 12 times in the previous 17 sessions.
Thirty-year tax-exempts set record lows four times in the previous eight sessions, while 20-year munis established all-time lows five times over the same time period.
The record lows currently stand at 2.17% and 3.67% in 10- and 30-year tax-exempts, both established Aug. 25. The 20-year low of 3.28% was set Aug. 31.
Thursday’s triple-A muni scale in 10 years was at 87.0% of comparable Treasuries and 30-year munis were at 95.9%, according to MMD, while 30-year tax-exempt triple-A general obligation bonds were at 105.3% of the comparable London Interbank Offered Rate.
The Treasury market showed losses Thursday.
The benchmark 10-year note was quoted near the end of the session at 2.76% after opening at 2.72%.
The 30-year bond finished at 3.93% after opening at 3.87%. The two-year note finished at 0.49% after opening at 0.48%.
Elsewhere in Thursday’s new-issue market, Morgan Stanley priced $197.8 million of limited project revenue bonds for the University of California Regents.
The bonds mature from 2011 through 2024, with yields ranging from 0.60% with a 2% coupon in 2012 to 3.42% with a 4% coupon in 2024. Bonds maturing in 2011 were decided via sealed bid.
The bonds, which are callable at par in 2020, are rated Aa2 by Moody’s and AA-minus by Standard & Poor’s.
Morgan Stanley also priced $121.1 million of GO refunding bonds for Cook County, Ill.
The bonds mature in 2025, 2026, and 2028, yielding 3.79%, 3.88%, and 4.00%, all with 5% coupons.
The yields on bonds maturing in 2025 and 2026 were raised eight basis points at re-pricing, while 2028 yields remained at 4.00%.
The bonds, which are callable at par in 2020, are rated Aa2 by Moody’s and AA by Standard & Poor’s and Fitch.
JPMorgan priced $73.7 million of water pollution control loan fund refunding revenue bonds for Ohio.
The bonds mature from 2018 through 2022, with yields ranging from 2.25% with a 5% coupon in 2018 to 2.91% with a 3% coupon in 2022.
The bonds, which are not callable, are rated triple-A by Moody’s and Standard & Poor’s.
In economic data released Thursday, producer prices rose 0.4% in August due to higher energy prices, posting their largest gain since March, the Commerce Department reported. Core producer prices, excluding food and energy goods, were up 0.1%.
Economists expected gains of 0.3% in producer prices and 0.1% in core prices, according to the median estimate from Thomson Reuters.
Manufacturing activity in the Philadelphia area unexpectedly stayed negative in September, as the general business conditions index narrowed to negative 0.7 from a previous reading of negative 7.7, according to the Federal Reserve Bank
of Philadelphia monthly report on business.
Economists surveyed by Thomson Reuters predicted a positive reading of 1.5 in the report, which covers eastern Pennsylvania, southern New Jersey, and Delaware. Positive readings indicate expansion.
Initial jobless claims fell by 3,000 filings during the week ending Sept. 11 to 450,000 — the lowest level since July. Continuing claims fell to 4.485 million for the week ending Sept. 4.
Economists expected 460,000 initial claims and 4.46 million continuing claims, according to the median estimate from Thomson Reuters.
