Market Post: Primary And Secondary Vie For Attention

NEW YORK – The tax-exempt market was steady to slightly weaker as a mix of both attention towards the primary and some focus on the secondary spurred activity.

“We don’t like the value in new deals,” a San Francisco trader said. “We like 5% coupons or better and a lot of stuff coming are not 5% coupons. We also like shorter calls. So we are looking mostly in the secondary where you can buy shorter calls, get paid a little, and get an extra kick.”

He added that in the secondary market Tuesday, there was a little action. “We are seeing the same stuff trade at good levels and the bad stuff cheapening up. It’s a little weaker but there is not a lot of give on the other side.”

Munis were steady Tuesday afternoon, according to the Municipal Market Data scale. On Monday,  the 10-year yield ended flat at 1.86% for the seventh consecutive trading session while the two-year ended steady at 0.32% for the 17th straight session. The 30-year yield finished flat at 3.16%.

Treasuries were mostly steady to weaker. The two-year yield and the benchmark 10-year yield rose one basis point each to 0.32% and 1.62%. The 30-year was steady at 1.69%.

In the primary market, Citi priced for institutions $1.14 billion of New York State Thruway Authority  general revenue bonds, rated A1 by Moody's Investors Service and A-plus by Standard & Poor's. Institutional pricing was not available by press time.

In retail pricing Monday, yields ranged from 0.94% with 3% and 4% coupons in a split 2015 maturity to 4.00% priced at par in 2037. Bonds maturing between 2024 and 2026, between 2028 and 2031, and in 2042 were not offered for retail. Credits maturing in 2014 were offered via sealed bid. The bonds are callable at par in 2022.

JPMorgan completed the pricing of $196.6 million of Texas A&M University System Board of Regents  bonds, backed by the triple-A rated Permanent University Fund. On Tuesday, $70.8 million of tax-exempt refunding bonds were priced following a $125.8 million taxable issue Monday.

Yields on the $70.8 million of tax-exempt bonds ranged from 1.48% with 4% and 5% coupons in a split 2019 maturity to 2.44% with a 5% coupon in 2024. The bonds are callable at par in 2022.

Yields on the $125.8 million of taxable bonds ranged from 0.579% priced at par in 2014 to 3.575% priced at par in 2032. Credits maturing in 2013 were offered via sealed bid with a 2% coupon. Spreads ranged from 28 basis points to 140 basis points above the comparable Treasury.

Citi priced $155 million of Dormitory Authority of the State of New York North Shore Long Island Jewish Hospital taxable and tax-exempt bonds. Prices were not yet available.

In the competitive market, Seattle auctioned $350.6 million of municipal light and power improvement revenue bonds in three pricings – including $298.2 million, $9.4 million, and $43 million. The bonds are rated Aa2 by Moody’s and AA-minus by Standard & Poor’s.

Citi won the bid for $298.2 million and JPMorgan won the bid for $9.4 million. Details were not yet available.

Wells Fargo Securities won the bid for $43 million of taxable bonds. Yields ranged from 3.10% with a 3.4% coupon in 2028 to 3.65% with a 3.75% coupon in 2033.

Wells Fargo won the bid for $215.9 million of triple-A rated Metropolitan Council of Minneapolis-St. Paul Metropolitan Area taxable GO wastewater revenue refunding bonds. Yields ranged from 0.25% priced at par in 2013 to 2.10% priced at par in 2022. Credits maturing in 2016 were not formally re-offered.

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