Bellwether issuers, including triple-A rated Maryland and the Bay Area Toll Authority, tempted buyers in the primary market Wednesday, though it wasn’t enough to offset an overall weaker tone as large institutions sold municipal bonds in the secondary.
Even as BATA received $2.3 billion in orders and increased the size of the deal to $900 million, traders said selling pressure on bonds maturing beyond 20 years pushed yields higher.
“The long end is bad,” a Pennsylvania trader said. “I think its 15 basis points off in the 20-year to 30-year range.”
Other traders said buyers in the primary market helped provide some support. “Munis seem weaker,” a New York trader said. “They are following Treasuries but they are not down as much. There is good demand in the primary and that is holding up the market today.”
Bank of America Merrill Lynch priced the largest deal of the week, $900 million of Bay Area Toll Authority San Francisco Bay Area subordinate lien toll bridge revenue bonds, rated A1 by Moody’s Investors Service and A-plus by Standard & Poor’s.
Yields ranged from 4.31% with a 5% coupon in 2027 to 5.45% with a 5.25% coupon in 2053. The bonds are callable at par in 2023. Yields were lowered five basis points on bonds maturing in 2027 and two basis points on bonds maturing in 2028 and 2043.
JPMorgan priced for institutions $508.9 million New York City general obligation bonds in two pricings following a two-day retail order period. The bonds are rated Aa2 by Moody’s and AA by Standard & Poor’s and Fitch Ratings.
Yields on the first pricing of $375 million ranged from 0.55% with a 3% coupon in 2015 to 4.88% with a 4.75% coupon in 2039. The bonds are callable at par in 2023. Yields were raised as much as 10 basis points on bonds maturing between 2026 and 2037 in repricing. Yields had already been raised as much as six basis points on bonds maturing between 2021 and 2025 from retail pricing. Yields were raised between 12 and 16 basis points on bonds maturing in 2027, 2028, 2030, and 2035 from retail pricing.
Yields on the second pricing of $133.9 million ranged from 0.19% with a 2% coupon in a 2014 to 2.74% with 4% and 5% coupons in a split 2021 maturity. Yields were raised two basis points on bonds maturing in 2021 from retail pricing.
JPMorgan priced for institutions $173.9 million of Florida’s Jacksonville Electric Authority water and sewer system revenue bonds following a retail order period Tuesday. The bonds are rated Aa2 by Moody’s and AA by Standard & Poor’s and Fitch.
Yields on the first series of $92.3 million ranged from 0.58% with a 3% coupon in 2015 to 4.11% with a 4.5% coupon in 2027. The bonds are callable at par in 2022. In repricing, yields were lowered between two and six basis points on bonds maturing between 2016 and 2021.
Yields on the second series of $81.6 million ranged from 0.25% with a 2% coupon in 2014 to 4.39% with a 5% coupon in 2029. The bonds are callable at par in 2019 except for bonds maturing between 2019 and 2022. Bonds maturing in 2028 and 2029 are callable at par in 2022.
Yields were lowered two and five basis points on bonds maturing between 2016 and 2018. In repricing, yields were raised two and four basis points on bonds maturing in 2028 and 2029. Yields had already been lowered between five and 10 basis points on bonds maturing between 2015 and 2018 from retail pricing.
In the competitive market, JPMorgan won the bid for $435 million of triple-A rated Maryland general obligation state and local facilities loan. Yields ranged from 1.04% with a 5% coupon in 2017 to 3.81% with a 4% coupon in 2028. The bonds are callable at par in 2021. Bonds with 5% coupons were priced right on Tuesday’ Municipal Market Data triple-A scale, except for bonds maturing between 2021 and 2024, which had yields three to five basis points above the scale.
Barclays won the bid for $200 million of Connecticut GOs, rated Aa3 by Moody’s and AA by Standard & Poor’s and Fitch.
Yields ranged from 0.48% with a 5% coupon in 2015 to 4.50% with a 4.375% coupon in 2033. The bonds are callable at par in 2023.
Still, selling pressure in the secondary pushed yields higher. “Large mutual funds are selling to raise cash and the long end is very sloppy,” the Pennsylvania trader said. “Brokers looking for retail investors want a bond at par and sell to make two points. It doesn’t matter what the fundamental value is.”
With most of the trading occurring on bonds maturing before seven years or after 20 years, the belly of the curve was choppy, he said. “Inside seven years some orders have depth, and beyond 20 years you have a retail bid. Away from that it’s by appointment.”
In the secondary market, trades compiled by data provider Markit showed weakening.
Yields on Philadelphia airport 5s of 2040 jumped 10 basis points to 5.16% and California’s Golden State Tobacco Securitization Corp. 5s of 2033 rose seven basis points to 7.21%.
Yields on Missouri State Environmental Improvement and Energy Resources Authority 5s of 2024 and San Antonio Electric and Gas 5s of 2038 rose seven basis points each to 3.00% and 4.78%, respectively.
Wednesday, yields on the Municipal Market Data scale ended as much as eight basis points higher. The 10-year yield increased four basis points to 2.76% and the 30-year yield rose eight basis points to 4.31%. The two-year finished steady at 0.43% for the sixth consecutive session.
Yields on the Municipal Market Advisors scale ended as much as seven basis points higher. The 10-year yield increased four basis points to 2.94% and the 30-year yield rose seven basis points to 4.38%. The two-year yield increased one basis point to 0.54%.
Treasuries weakened Wednesday. The benchmark 10-year yield jumped eight basis points to 2.59% and the 30-year yield rose eight basis points to 3.65%. The two-year yield rose five basis points to 0.36%.
