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Market Post: New Deals Priced Well in Primary; Secondary Slows

NEW YORK – The tax-exempt market continues to take its direction from the primary market as most of the week’s largest deals are pricing Tuesday. With the focus on the primary, secondary activity is starting to slow.

“We have a couple of deals that are going quite well today,” a Los Angeles trader said. “So there is a focus on that. But there is a feeling nationally that this week is a lighter calendar than we’ve had over last few weeks and so there is an opportunity to clean up some deals. But, the secondary is still pretty sleepy out there.”

He added that most of the direction in munis is coming from supply and demand, and that the Eurozone events aren’t having an impact. “I don’t see anything from Greece,” the trader added. “It’s pretty much a non-event. Certainly we are seeing it in Treasuries and we underperformed for long period of time. But it’s not really on the radar screen.”

He added that with all the attention on supply and demand, it has been a little disappointing that the June reinvestment money hasn’t pushed munis up. “So there’s hope that July and August will be better. But given the last couple weeks’ focus has been on the primary, we just aren’t getting enough activity in secondary.”

Munis were steady Tuesday afternoon, according to the Municipal Market Data scale. On Monday, the 10-year and the 30-year yield finished steady at 1.86% and 3.15%, respectively. The two-year yield was flat at 0.32% for the 12th straight session.

Treasuries were weaker after a stronger session Monday. The benchmark 10-year yield and the 30-year yield each rose four basis points to 1.62% 2.71%. The two-year was steady at 0.30%.

In the primary market, Citi priced $766.1 million of Massachusetts School Building Authority senior dedicated sales tax refunding bonds, rated Aa1 by Moody’s Investors Service and AA-plus by Standard & Poor’s and Fitch Ratings.

Yields ranged from 2.12% with 3%, 4%, and 5% coupons in a split 2021 maturity to 3.06% with a 5% coupon in 2030. The bonds are callable at par in 2022.

Jefferies & Co. priced for institutions $680.5 million of New York City Municipal Water Finance Authority water and sewer system second general resolution revenue bonds, following a retail pricing Monday. The bonds are rated Aa2 by Moody’s and AA-plus by Standard & Poor’s and Fitch. Pricing details were not yet available.

In retail pricing Monday, yields on the first series, $630.5 million, ranged from 1.85% with 4% and 5% coupons in a split 2020 maturity to 3.85% with a 3.75% coupon in 2034. Credits maturing in 2024, 2028, 2033, and 2045 were not offered for retail. The bonds are callable at par in 2022.

Bonds in the $50 million second series yielded 0.80% with a 5% coupon in 2017 and 1.30% with a 5% coupon in 2019. Credits maturing in 2017 are callable at par in 2015. Credits maturing in 2019 are callable at par in 2017.

Morgan Stanley priced and repriced $311.1 million of Hospitals and Higher Education Facilities Authority of Philadelphia hospital revenue bonds for Temple University Health System, rated Ba1 by Moody’s and BBB-minus by Standard & Poor’s and Fitch.

Bonds on the first series of $219.2 million yielded 5.80% with a 5.625% coupon in 2036 and 5.875% with a 5.625% coupon in 2042. The bonds are callable at par in 2022.

Yields on the second series of $91.9 million yielded 3.625% with a 5% coupon in 2015 to 4.70% with a 6.25% coupon in 2023. Bonds maturing in 2023 are callable at par in 2017. Yields were lowered five and 12 basis points from preliminary pricing.

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