Activity in the tax-exempt market picked up Tuesday as a hefty new-issue calendar drew attention away from the secondary market.
Traders said new deals were received well despite higher muni and Treasury yields for the second consecutive trading session.
“It’s tough to get trades off today,” a New York trader said, referring to market participants focusing on the primary.
“The secondary is a little slow today with new issues in the market, but from what I’ve been hearing deals are going fairly well,” a second New York trader said. “Some guys are a little heavy from last week, but with June reinvestment money kicking in, we’ll have to see. New deals will dictate what will happen this week.”
He added that between the current refundings and the typically high reinvestment money in June and July, the amount of money in the market might be bigger than past years.
Despite deals being fairly well-received, munis were weaker Tuesday, according to the Municipal Market Data scale. Yields between the three- and 11-year rose one and two basis points while yields outside 12 years jumped three and four basis points.
On Tuesday, the 10-year yield jumped two basis points to 1.78%, remaining 11 basis points above its record low of 1.67% set Jan. 18. The 30-year yield spiked up four basis points to 3.09%, closing five basis points off the record low of 3.04% set Friday. The two-year yield was steady at 0.32% for the third consecutive trading session.
The Treasury yield curve steepened as yields on the long end rose for the second straight session. The benchmark 10-year yield jumped four basis points to 1.57% while the 30-year yield spiked up six basis points to 2.63%. The two-year yield fell two basis points to 0.25%.
In the negotiated market, Wells Fargo Securities priced the largest deal of the week, $1.1 billion of Los Angeles County tax and revenue anticipation notes in three series. The notes are rated MIG-1 by Moody’s Investors Service, SP-1-plus by Standard & Poor’s and F1-plus by Fitch Ratings. Pricing details were not available by press time.
Goldman, Sachs & Co. held its second day of retail pricing for $800 million of New York City Transitional Finance Authority future tax-secured and tax-exempt subordinate bonds in two series. The bonds are rated Aa1 by Moody’s and AAA by Standard & Poor’s and Fitch.
Yields ranged from 0.55% with 2%, 4% and 5% coupons in a split 2015 maturity to 3.37% with a 4% coupon in 2039. Credits maturing in 2014 were offered via sealed bid.
Bonds maturing in 2024, 2025, 2029 and 2030, and between 2034 and 2038, were not offered for retail. The bonds are callable at par in 2022 except for credits maturing between 2026 and 2028, which are callable at par in 2018.
Yields were increased up to six basis points on the long end from the first day of retail pricing Monday.
Barclays Capital priced $311 million of Metropolitan Washington Airports Authority system revenue refunding bonds, rated Aa3 by Moody’s and AA-minus by S&P and Fitch.
Yields on the first series, $290.2 million of airport system revenue refunding bonds subject to the alternative minimum tax, ranged from 1.44% with 3% and 5% coupons in a split 2016 maturity to 4.125% priced at par in 2032. The bonds are callable at par in 2022.
Yields on the second series, $20.8 million of non-AMT refunding bonds, ranged from 0.40% with a 3% coupon in 2013 to 1.79% with a 5% coupon in 2019.
On the competitive calendar, Minnesota’s triple-A rated Metropolitan Council of the Twin Cities auctioned $223.5 million of general obligation bonds in four pricings: $93.9 million, $65 million, $57.6 million and $7 million.
JPMorgan won the bid for $93.9 million. The bonds had 5% coupons from 2014 to 2025. Prices were not yet available. The bonds are callable at par in 2022.
JPMorgan won the bid for $65 million. The bonds had a 3% coupon in 2013 to a 4.5% coupon in 2032. Prices were not yet available. The bonds are callable at par in 2022.
Bank of America Merrill Lynch won the bid for $57.6 million. Yields ranged from 1.00% with a 4% coupon in 2018 to 3.16% with a 3% coupon in 2028. Credits maturing between 2013 and 2017 and between 2029 and 2032 were not formally re-offered. The bonds are callable at par in 2022.
JPMorgan won the bid for $7 million. Coupons ranged from 2% in 2013 to 5% in 2017. The notes were not formally re-offered.
In the secondary market, trades compiled by data provider Markit showed weakening during Tuesday’s session. Yields on Massachusetts 5s of 2022 jumped four basis points to 2.05% while Texas 5s of 2029 increased three basis points to 2.08%.
Yields on Georgia 5s of 2023 and New Jersey’s Garden State Preservation Trust 5s of 2018 each rose one basis point to 1.91% and 1.26%.
Trades reported by the Municipal Securities Rulemaking Board over the past few trading sessions also showed weakening.
A dealer sold to a customer Phoenix 4s of 2022 at 2.15%, 13 basis points higher than where they traded Friday.
Another dealer sold to a customer Virginia Commonwealth Transportation Board 4s of 2034 at 3.72%, seven basis points higher than where they traded Thursday.
Bonds from an interdealer trade of Tampa Health System 4s of 2033 yielded 4.13%, four basis points higher than where they traded Thursday. A dealer bought from a customer New Jersey Transportation Trust Fund Authority 5.754s of 2028 at 4.16%, one basis point higher than where they traded Thursday.
