Market Close: Wayne County Trades Weaker, DFW Cuts Deal in Half

The municipal bond market ended two basis points weaker on the long-end of the curve Wednesday as buyers stayed focused on short duration bonds.

Underwriters in the primary market were able to increase prices on bonds maturing before 2020 while Fitch Ratings' five-notch downgrade of Michigan's Wayne County kept sellers busy in the secondary.

Late Tuesday, Fitch downgraded the county's general obligation bonds five notches to BB-minus, pushing them into junk status. Bonds subsequently traded lower.

In odd-lot trading of one CUSIP of Wayne County Building Authority GO limited tax bonds, a customer sold to a dealer 10s of 2040 at 10.11%, 50 basis points higher than where the bonds were sold Tuesday.

In another trade of the same CUSIP, bonds in an interdealer trade also yielded 10.11%, 76 basis points higher than on Tuesday.

Both taxable and revenue bonds were weaker Tuesday, with airport revenue 5s of 2037 falling one to two points, analysts at Markit said. "I have seen a couple of dealers quote Wayne County slightly cheaper but I don't see any significant drop," the analyst said.

Looking beyond Wayne County, a New York trader said the market felt one to two basis points weaker, extending losses from Tuesday. Still, this trader said buyers in the new issue market found bonds attractive on the front end of the curve.

Another trader described the market as "stagnant" but a few basis points weaker. "It feels weaker but there are not necessarily the trades to reflect that," a Chicago trader said. "We are still looking at outflows and Treasuries are off and it's a stagnant fixed-income market in general. We are weaker by a couple basis points."

In the primary market Wednesday, JPMorgan issued a preliminary retail wire for $5.5 billion of California revenue anticipation notes, ahead of institutional pricing Thursday. The notes are rated MIG-1 by Moody's Investors Service, SP-1-plus by Standard & Poor's, and F1 by Fitch Ratings.

The first series of $2.5 billion had prospective yields ranging from 0.18% to 0.23% with a 2% coupon in 2014. The second series of $3 billion had prospective yields ranging from 0.20% to 0.27% with a 2% coupon in 2014.

When California issued $10 billion of RANs in August 2012, the May 2013 maturities yielded 0.33% and the June 2013 maturities yielded 0.43%, the Treasurer's office said Wednesday.

Raymond James & Associates priced for institutions $386.5 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.

Yields on the first series of $345.3 million ranged from 2.71% with a 5% coupon in 2020 to 5% priced at par in 2038. The bonds are callable at par in 2023. Yields were raised seven basis points on bonds maturing in 2026 and two basis points on bonds maturing in 2032 from retail pricing Tuesday.

Yields on the second series of $41.2 million of refunding bonds, ranged from 0.61% with a 3% coupon in 2015 to 3.81% with a 5% coupon in 2024. Bonds maturing in 2014 were offered via sealed bid. The bonds are callable at par in 2023. Yields were lowered between two and seven basis points on bonds maturing between 2015 and 2018 from retail pricing Tuesday. Yields were raised seven basis points on bonds maturing beyond 2020.

Citi priced $226.7 million of Dallas-Fort Worth International Airport joint revenue refunding bonds, subject to the alternative minimum tax. The bonds are rated A2 by Moody's, A-plus by Standard & Poor's, and A by Fitch.

Yields ranged from 1.10% with a 4% coupon in 2015 to 5.37% with a 5.25% coupon in 2033. Bonds maturing in 2014 were offered via sealed bid. The bonds are callable at par in 2023.

The deal was expected to price Thursday, but the issuer accelerated the sale by a day, and cut the size from planned $415 million, after the U.S. Justice Department opposed the merger of DFW's largest tenant, American Airlines, with US Airways.

Morgan Stanley priced $150 million of Philadelphia water and wastewater revenue bonds, rated A1 by Moody's, A by Standard & Poor's, and A-plus by Fitch. Yields ranged from 1.33% with a 4% coupon in 2017 to 5.25% with a 5.125% coupon in 2043. Bonds maturing in 2043 are callable at par in 2022.

Trades in the secondary market were weaker.

Yields on California's Golden State Tobacco Securitization Corp. 5.125s of 2047 jumped 10 basis points to 7.75% and JobsOhio Beverage System 5s of 2038 rose four basis points to 5.14%.

Yields on Dormitory Authority of the State of New York 5s of 2032 and New Jersey Transportation Trust Fund Authority 5.5s of 2021 rose three basis points each to 4.33% and 3.17%, respectively.

Yields on Dallas Fort-Worth International Airport 5s of 2035 rose three basis points to 5.15% and Texas 5s of 2025 increased two basis points to 3.35%.

Wednesday, yields on the Municipal Market Data scale ended as much as two basis points higher. The 10-year yield rose one basis point to 2.80. The 30-year was steady at 4.33% and the two-year finished flat at 0.43% for the 21st consecutive session.

Yields on the Municipal Market Advisors scale ended as much as three basis points higher. The 30-year yield increased two basis points to 4.42%. The 10-year was steady at 2.95% and the two-year was unchanged at 0.54% for the sixth session.

Treasuries ended the day stronger on front end of the curve. The two-year and benchmark 10-year yields fell one basis point each to 0.33% and 2.71%, respectively. The 30-year was flat at 3.75%.

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