The tax-exempt market started to slow down Thursday afternoon after a busy morning as primary deals had all been priced and traders waited to receive allotments.
While the overall tone of the market was slightly weaker, traders said deals were still well received and the secondary was able to keep some of the attention.
“It’s slow,” a Chicago trader said Thursday afternoon. “It’s seriously slowing down. Most of the primary is out of the way. Big issues were priced so everyone is waiting to see. And there were big deals Wednesday because it’s a shortened week.”
He added that in order to get deals in the primary, you have to pay the price. “Deals are going at a price because in all honesty, if you buy a new issue you can say that was how it was priced. But if you buy in the secondary, there is subjective criticism.”
He continued that with rates so low, most traders are concerned about overpaying. If he buys in the primary, he knows he is paying what other traders have to pay.
Other traders noted that while the majority of the focus was on the primary, the secondary market held up some of the activity.
“There is still a lot of primary coming today,” a New York trader said. “Munis are down a little but bids are holding in there.”
In the biggest deals of the week, Bank of America Merrill Lynch priced for institutions $818.3 million of Dormitory Authority of the State of New York personal income tax revenue bonds, rated AAA by Standard & Poor’s and AA by Fitch Ratings.
Yields on the first series, $763.6 million of tax-exempt bonds, ranged from 0.31% with 2% and 5% coupons in a split 2014 maturity to 3.20% with a 5% coupon in 2042. Credits maturing in 2013 were offered via sealed bid. The bonds are callable at par in 2022. Credits maturing in 2022 are not callable. Yields were lowered two basis points from retail pricing on credits maturing in 2019 and 2021 and five basis points on those maturing in 2020.
Yields on the second series, $54.7 million of tax-exempt bonds, ranged from 0.36% with a 2.5% coupon in 2014 to 3.28% with a 5% coupon in 2037. The bonds are callable at par in 2022. Yields were increased from retail pricing four and five basis points on bonds maturing between 2028 and 2034 and lowered two basis points on bonds maturing in 2037.
Jefferies & Co. priced for institutions $890.4 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.
Yields ranged from 0.73% with 3% and 4% coupons in a split 2017 maturity to 3% priced at par in 2030. The bonds are callable at par in 2022. Yields were lowered as much as three basis points from retail pricing.
Morgan Stanley priced and repriced $300 million of Los Angeles Department of Water and Power power system revenue bonds, following a $350 million issue priced by JPMorgan on Wednesday. The bonds are rated Aa3 by Moody’s and AA-minus by Standard & Poor’s and Fitch.
The bonds yielded 0.58% with 3%, 4%, and 5% coupons in a split 2016 maturity. The bonds are callable at par in 2015. Yields were lowered three basis points from preliminary pricing.
In the competitive market, Maryland University Systems auctioned $169 million of auxiliary facility sand tuition revenue bonds in two pricings — a $115 million deal followed by a $54 million deal. The bonds are rated Aa1 by Moody’s and AA-plus by Standard & Poor’s and Fitch.
Citi won the bid for $115 million. Yields ranged from 0.20% with a 3% coupon in 2013 to 2.98% with a 3% coupon in 2032. The bonds are callable at par in 2022.
JPMorgan won the bid for $54 million. Yields ranged from 0.30% with a 4% coupon in 2014 to 2.51% with a 3% coupon in 2026. Credits maturing in 2013 were not formally re-offered. The bonds are callable at par in 2022.
In the secondary market, trades compiled by data provider Markit showed a mix of strengthening and weakening.
Yields on Jacksonville Electric Authority 3.625s of 2035 jumped four basis points to 3.65% while California 5s of 2021 increased three basis points to 2.16%. Yields on Houston Higher Education Finance Corp. 5s of 2032 rose two basis points to 3.98%.
Other trades showed strengthening. Yields on Port Authority of New York and New Jersey 4.458s of 2062 dropped three basis points to 4.41%. Yields on Ohio’s Buckeye Tobacco Settlement Financing Authority 5.875s of 2030 and Columbus, Ohio 5s of 2021 fell two basis points each to 7.58% and 1.60%, respectively.
On Thursday, the Municipal Market Data scaled was mixed with yields rising in the belly of the curve and falling on the long-end. The two-year yield finished flat at 0.30% for the 12th consecutive trading session while the 10-year yield closed steady at 1.70% for the third session. The 30-year yield fell one basis point to 2.86%.
Treasuries pared all losses in the morning to post gains by the afternoon. The benchmark 10-year yield fell one basis point to 1.68% while the 30-year yield fell three basis points to 2.86%. The two-year was steady at 0.27%.
Treasuries initially saw a selloff Thursday morning due to better-than-expected economic news. Initial jobless claims fell 30,000 to 339,000 for the week of Oct. 6, the lowest level since Feb. 16, 2008. Economists had expected a decrease of 2,000 to 365,000.
