Market Post: With July 1 Money Handy, Borrowers Test Demand

A few deals in the primary market priced Monday morning as borrowers took advantage of July 1 reinvestment money and a light new issue calendar in a holiday-shortened week.

The Securities Industry and Finance Markets Association recommends an early close Wednesday and a full close Thursday for the Fourth of July holiday. Still, a few issuers are expected to borrow in the primary Monday and Tuesday.

The new issue market can expect $991 million of bonds, down from last week's revised $6.09 billion. In negotiated deals, $948.2 million should be priced, down from last week's revised $4.84 billion. On the competitive calendar, $42.8 million is expected to be auctioned, down from last week's revised $1.25 billion.

Monday, Citi issued a premarketing wire for $663.8 million of Louisiana Tobacco Settlement Financing Corp. asset-backed refunding bonds, rated BBB-plus by Standard & Poor's and Fitch Ratings.

Yields ranged from 1.32% with a 5% coupon in 2016 to 5.35% with a 5.25% coupon in 2035. Bonds maturing between 2024 and 2035 are callable at par between 2015 and 2023. Spreads ranged from 50 basis points to 170 basis points over Friday's Municipal Market Data scale.

Ramirez & Co. priced for retail $111.9 million of triple-A Ohio Water Development Authority revenue bonds. Yields ranged from 1.67% with a 5% coupon in 2018 to 2.84% with a 5% coupon in 2023.Bonds maturing in 2013 and 2014 were offered via sealed bid.

Outside the new deals, the market was quiet. "The market has not revved up yet," a New York trader said, adding there wasn't significant trading Monday morning. "It'll be interesting to see if they try to squeeze in all these deals on a short week."

Friday, yields on the Municipal Market Data scale ended steady across the curve. The 10-year and 30-year yields were steady at 2.56% and 3.83%, respectively. The two-year was flat at 0.50% for the third session.

Yields on the Municipal Market Advisors scale ended as much as two basis points lower. The two-year yield fell two basis points to 2.72% and the 30-year yield fell one basis point to 3.95%. The two-year was steady at 0.53% for the second session.

Treasuries were mostly steady Monday morning. The two-year and benchmark 10-year yields were flat at 0.36% and 2.51%, respectively. The 30-year yield fell one basis point to 3.51%.

In economic news, the Institute for Supply Management index climbed to 50.9 in June from 49.0 in May, coming in above economists' expectations of 50.5.

"The manufacturing ISM activity index rose back above 50 in June after spending one month below the 50 mark," wrote economists at RDQ Economics. "While the rebound was slightly greater than expected, the employment component pointed to a drop in manufacturing employment in June. New order growth edged up and production posted a solid rebound. It was also encouraging to see decent gains in both import and export orders. This report and the May durable goods orders data hold out hope that manufacturing growth is beginning to pick up again."

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