Market Post: Munis Steady As Large Primary Set To Price

The tax-exempt market was steady Wednesday morning, continuing the week’s trend of steady to slightly higher yields.

Most of the attention turned to the primary market where the majority of the week’s new issuance is expected to price today and Thursday.

Munis were steady in morning trading, according to the Municipal Market Data scale. On Tuesday,  the 10-year and 30-year yields jumped four basis points each to 1.75% and 2.91%, respectively. The 10-year yield now remains 15 basis points off its record low of 1.60% set July 26. The 30-year yield is hovering 12 basis points off its record low yield of 2.79% set July 25. The two-year finished steady at 0.29% for the ninth consecutive session.

Treasuries were stronger across the curve. The two-year yield and the benchmark 10-year yield fell one basis point each to 0.27% and 1.62%, respectively. The two-year yield dropped two basis points to 2.70%.

In the primary market, Bank of America Merrill Lynch is expected to price for institutions $850 million of New York City Transitional Finance Authority future tax-secured bonds and subordinate bonds, rated Aa1 by Moody's Investors Service and AAA by Standard & Poor's and Fitch Ratings.

In the second day of retail pricing Tuesday, yields on the first series, $100 million of subordinate bonds, ranged from 0.53% with 2% and 4% coupons in a split 2015 maturity to 2.49% with a 2.5% coupon in 2026. Credits maturing in 2014 were offered via sealed bid. The bonds are callable at par in 2022. Yields were increased between three and five basis points from the first day of retail pricing Monday.

Yields on the second series, $750 million of future tax-secured subordinate bonds, ranged from 0.58% with a 5% coupon in 2015 to 3% priced at par and 2.86% with a 5% coupon in a split 2032 maturity. Bonds maturing in 2013 and 2014 were offered via sealed bid. Credits maturing between 2024 and 2027 and between 2029 and 2031 were not offered for retail. The bonds are callable at par in 2022. Yields were increased between three and five basis points from the first retail order period Monday.

In the competitive market, the NYC TFA is expected to auction $350 million of revenue bonds in two pricing – $200 million and $150 million.

Barclays Capital is expected to price $729 million of Chicago O’Hare International Airport  general airport revenue refunding bonds, rated A2 by Moody’s and A-minus by Standard & Poor’s and Fitch. The deal includes $446 million of bonds subject to the alternative minimum tax, $251 million of bonds subject to the AMT, and $32 million of debt not subject to the AMT.