Market Post: Sellers on Long Maturities Keep Demand Inside Five Years

The tax-exempt market continued to weaken Tuesday afternoon as bid lists surfaced for longer-maturing bonds and buyers stayed focused on the short-end of the curve.

As sellers emerged in the secondary, market participants looked to the new issue market. "Bid lists were significant this morning," a New York trader said. "Bids are weaker but not many customers are hitting bids, especially on the long end." In the primary market, demand was strong within five years, this trader said.

Goldman, Sachs & Co. held a preliminary pricing for $238 million Maryland Health and Higher Educational Facilities Authority revenue bonds for the Johns Hopkins Health System. The bonds are rated Aa3 by Moody's Investors Service and AA-minus by Standard & Poor's and Fitch Ratings.

Yields ranged from 0.93% with a 3% coupon in 2016 to 5.13% with a 5% coupon in 2043. The bonds are callable at par in 2023.

RBC Capital Markets held a preliminary pricing for $196.4 million of JEA electric system bonds, following a retail order period Monday.

The first series of $33 million of revenue bonds is rated Aa2 by Moody's, AA-minus by Standard & Poor's, and AA by Fitch. Yields ranged from 0.56% with a 3% coupon in 2015 to 4.48% with a 5% coupon in 2030. The bonds are callable at par in 2023.

The second series of $163.4 million of subordinated revenue bonds is rated Aa3 by Moody's, A-plus by Standard & Poor's, and AA by Fitch. Yields ranged from 0.61% with a 3% coupon in 2015 to 5% priced at par in 2035. Bonds maturing in 2014 were offered via sealed bid. The bonds are callable at par in 2018 except for those maturing between 2019 and 2022. Bonds maturing between 2023 and 2027 are callable at par in 2023.

Yields were lowered between five and seven basis points on bonds maturing between 2015 and 2019. In retail pricing Monday, the underwriter stopped taking orders on shorter-maturing bonds due to demand.

Raymond James & Associates priced for retail $383.6 million of Reedy Creek, Fla., Improvement District ad valorem tax bonds, rated Aa3 by Moody's, A-plus by Standard & Poor's, and AA-minus by Fitch. Institutional pricing is expected Wednesday.

Yields on the first series of $344.2 million ranged from 4.10% priced at par in 2026 to 5% priced at par in 2038. Bonds maturing between 2020 and 2025, in 2027, 2028, 2030, 2031, and in 2033 were not offered for retail. The bonds are callable at par in 2023.

Yields on the second series of $39.4 million of refunding bonds, ranged from 0.68% with a 3% coupon in 2015 to 3.74% with a 5% coupon in 2024. Bonds maturing in 2014 were offered via sealed bid. The bonds are callable at par in 2023.

M.R. Beal & Co. is expected to hold a second day of retail for $350 million Connecticut general obligation bonds. Institutional pricing is expected Wednesday. The bonds are rated Aa3 by Moody's and AA by Standard & Poor's, Fitch, and Kroll Bond Ratings.

In the first retail pricing Monday, the first series of $115 million of GO SIFMA index bonds were not offered.

Yields on the second series of $235 million of GOs ranged from 0.47% with a 4% coupon in 2015 to 4.50% with a 4.375% coupon in 2033. Bonds maturing in 2014, 2026, 2027, and between 2029 and 2032 were not offered for retail. The bonds are callable at par in 2023.

Monday, yields on the Municipal Market Data scale ended steady after an unchanged session Friday. The 10-year yield closed unchanged at 2.72% for the third session and the 30-year was steady at 4.28% for the fifth session. The two-year finished flat at 0.43% for the 19th consecutive session.

Yields on the Municipal Market Advisors scale were mostly flat to one basis point higher on longer maturing bonds Monday. The 10-year yield fell one basis point to 2.89% while the 30-year yield increased one basis point to 4.34%. The two-year yield was unchanged at 0.54% for the fourth session.

Treasuries continued to weaken Tuesday afternoon. The benchmark 10-year yield rose 11 basis points to 2.72% and the 30-year yield increased nine basis points to 3.76%. The two-year yield rose three basis points to 0.34%.

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