Market Close: Munis End Firmer As Primary Trades Up In Secondary

After losses earlier in the week, the tax-exempt market posted its second session of gains as a large deal from the University of Connecticut priced in the primary market.

“Munis are definitely stronger today by two to three basis points,” a New York trader said. “Traders are turning over a lot of items today so there is good activity inside 2020.”

Retail bought $75 million of orders for UConn issue, or about 30% of the deal. “It’s going better than they thought, especially for a summer Friday,” this trader said.

Piper Jaffray priced for retail $228.5 million of the university general obligation bonds, rated Aa3 by Moody’s Investors Service, AA by Standard & Poor’s, and AA-minus by Fitch Ratings.

Yields on the first series of $174.3 million ranged from 0.50% with a 3% coupon in 2015 to 4.33% with a 4.25% coupon in 2033. Bonds maturing in 2014, 2030 and 2032 were not offered for retail. The bonds are callable at par in 2023.

Yields on the second series of $54.2 million ranged from 0.40% with a 3% coupon in 2015 to 3.14% with a 4% coupon in 2024. Bonds maturing in 2014 were not offered for retail. The bonds are callable at par in 2023.

A second retail order period is expected Monday with institutional pricing Tuesday.

Bonds that priced earlier in the week traded higher in the secondary. “There is definitely firming going on out there,” a Virginia trader said, adding Utah 5s of 2019 traded at 1.71%, four basis points through the Municipal Market Data scale. Morgan Stanley won the bid for $217 million of Utah general obligation bonds in the competitive market Thursday and bonds on most maturities were priced firmer than the MMD scale.

“Demand is strong and just a few basis points stronger,” he said. “The trades that are getting done have a stronger bias but by virtue of it being a Friday it can’t warrant as big of a move as Thursday.”

In the secondary market, trades compiled by data provider Markit showed firming.

Yields on Connecticut 5s of 2022 and California 5s of 2041 fell two basis points each to 2.82% and 4.66%, respectively.

Yields on New York 5s of 2034 and Wylie, Texas, Independent School District 0s of 2021 fell two basis points each to 4.20% and 2.95%, respectively.

Yields on New Jersey State Turnpike Authority 5s of 2038 and Katy, Texas, Independent School District 5s of 2025 dropped one basis point each to 4.59% and 3.19%, respectively.

Friday, yields on the Municipal Market Data scale ended as much as four basis points lower. The 10-year and 30-year yields slid one basis point each to 2.66% and 4.00%, respectively. The two-year was steady at 0.45% for the second session.

Yields on the Municipal Market Advisors scale ended as much as three basis points lower Friday. The 10-year and 30-year yields slipped one basis point each to 2.84% and 4.11%, respectively. The two-year was steady at 0.54% for the second session.

After posting gains in the morning, Treasuries ended weaker Friday. The benchmark 10-year and 30-year yields rose one basis point each to 2.59% and 3.64%, respectively. The two-year yield increased one basis point to 0.35%.

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