Weaker Treasuries and restrained activity produced a balanced, yet unspectacular, session for munis Thursday.
Tax-exempt yields followed those of Treasuries into weaker territory, but only modestly so, allowing munis to outperform and their ratios to Treasuries to drop into richer terrain.
The week’s taxable yields hit the primary market to minimal fuss. And a large Honolulu deal for general obligation bonds arrived and repriced several basis points lower in some maturities. The secondary market saw action in the morning, traders said, but mostly fizzled out as the day progressed.
Overall, the market felt stable, a trader in Texas said.
“It’s been pretty quiet today for us,” he said. The market looked pretty much unchanged, not much movement one way or the other. We’ve cut things five basis points and moved some stuff. If it’s within an 0-5, it’ll generate some interest. But it’s not a major thing one way or another.”
A trader in New Jersey said his firm had to adjust yields a few basis points higher on a couple of smaller deals on the day to get them done. “That would probably be a somewhat common theme today,” he said.
Traders, in general, said yields appeared slightly higher on the day. One market gauge saw triple-A yields rise up to three basis points on the curve beyond two years.
Primary market supply is expected to weigh in at $7.64 billion this week, compared with a revised $7.44 billion last week. The number approximates the amount the market has been seeing lately, which industry watchers say has
In the week’s heftiest deal, JPMorgan Thursday priced $1.5 billion of Catholic Health Initiatives, in Colorado, taxable bonds and another $91.8 million of tax-exempt debt. The bonds are rated Aa3 by Moody’s Investors Service and AA-minus by Standard & Poor’s and Fitch Ratings.
The credits arrived with the taxable paper maturing in 2017, yielding 100 basis points over the comparable Treasury yield; in 2022, yielding 125 basis points over the comparable Treasury yield; and in 2042, yielding 150 basis points over the comparable Treasury yield.
JPMorgan priced $91.8 million of Colorado Health Facilities Authority revenue bonds for the Catholic Health Initiatives. Yields range from 2.90% with a 5.00% coupon in 2026 to 3.96% with a 4.00% coupon in 2039. The bonds are callable at par in 2022.
Bank of America Merrill Lynch priced $579.4 million of Honolulu city and county GO bonds in three series. The bonds are rated Aa1 by Moody’s and AA-plus by Fitch.
Yields in the first series, $255.5 million, range from 0.81% with coupons of 4.00% and 5.00% in a split maturity in 2017 to 3.25% with a 4.00% coupon in 2037. During repricing, yields were lowered up to five basis points in credits maturing in the short and intermediate sections of the curve.
Yields in the second series, $291.2 million, range from 0.65% with a 5.00% coupon in 2016 through 2.64% with a 4.50% coupon and 2.99% with a 3.00% coupon in a split maturity in 2029. During repricing, yields at the 10-year mark were lowered five basis points.
Yields in the third series, $32.7 million, range from 0.30% with a 2.00% coupon in 2013 to 2.84% with a 2.75% coupon in 2027. The bonds in all three series are callable at par in 2022.
B of A Merrill also priced $334.8 million of taxable Honolulu GO bonds in four series. Bonds in the first series, $17.9 million, are priced at par to yield between 1.26% and 3.36% from 2017 and 2028; the price yields between 30 and 155 basis points over the comparable Treasury yields.
Bonds in the second series, $75 million, are priced at par to yield between 0.78% and 1.26% from 2015 and 2017. The price yields between 35 and 45 basis points over the comparable Treasury yields.
Bonds in the third series, $50.6 million, are priced at par to yield between 1.26% and 2.41% from 2017 and 2021. The price yields between 30 and 60 basis points over the comparable Treasury yields.
Bonds in the fourth series, $191.3 million, are priced at par to yield between 1.26% and 2.81% from 2017 and 2023. The price yields between 30 and 100 basis points over the comparable Treasury yields.
The bonds in the first and fourth series are callable at par in 2022.
The benchmark 10-year muni yield ended Thursday’s session three basis points higher at 1.75%, according to Municipal Market Data. The 30-year yield rose two basis points to 2.85%. The two-year remained at 0.30% for the 22nd straight trading session.
“People are following Treasuries [Thursday],” the New Jersey trader said. “That’s probably the major thing. There’s nothing specific to munis that would cause the weakening. Supply isn’t terrible right now. Rates have come down quite a bit, and you’re now starting to see some adjustments that would be part of a normal mini-cycle here.”
Treasuries yields backed up Thursday. The benchmark 10-year yield rose six basis points to 1.83%.
The 30-year yield jumped five basis points to 2.98%. The two-year yield has increased three basis points to at 0.33%.
In economic news, the Commerce Department reported Thursday that new orders for manufactured durable goods increased $19.6 billion, or 9.9%, to $218.2 billion in September.
