Market Post: Muni Yields Rise with Treasuries, Volume Slows

The tax-exempt market outperformed Treasuries Wednesday and yields on municipal bonds rose less than their taxable counterparts.

In Wednesday afternoon trading, municipal bond yields rose three to five basis points on bonds maturing beyond 10 years, traders said. "Munis are weaker but there is lower volume and overall just not as much demand," a Chicago trader said. "There was a little strength this morning but it's getting slower and slower."

He added the California bonds that priced in the primary market Tuesday came cheap, which pushed other California bonds in the secondary lower. "It's going to make the market weaker for California stuff for a couple of weeks. Bonds were still available from the last deal they brought. This will hold it over too."

In the primary Wednesday, JPMorgan priced for retail $662.2 million of New York City Housing Development Corp. capital fund grant program revenue bonds, rated AA-minus by Standard & Poor's. Institutional pricing is expected Thursday.

Yields on the first series of $188.4 million ranged from 1.17% with a 3% coupon in 2016 to 4.14% with a 4% and 5% coupon in a split 2025 maturity. Bonds maturing in 2014 and 2015 were offered via sealed bid. The bonds are callable at par in 2023. Yields were lowered between one and three basis points on bonds maturing beyond 2019 from pre-marketing levels.

Bonds on the second series of $473.8 million yielded 4.70% with a 5% coupon in 2029 and 5.03% with a 5% coupon in 2033. Bonds maturing in 2014 and 2015 were offered via sealed bid. Bonds maturing between 2016 and 2032 were not offered for retail. The bonds are callable at par in 2023. Yields were lowered four and three basis points from pre-marketing levels on bonds maturing in 2029 and 2033, respectively.

JPMorgan repriced $111.3 million of New Jersey Health Care Facilities Financing Authority revenue bonds for Robert Wood Johnson University Hospital, rated A2 by Moody's Investors Service and A by Standard & Poor's.

Yields ranged from 1.28% with a 3% coupon in 2016 to 5.53% with a 5.5% coupon in 2043. The bonds are callable at par in 2023. Yields were lowered between three and five basis points on bonds maturing between 2016 and 2018 and lowered 10 and five basis points on bonds maturing in 2035 and 2043, respectively.

Tuesday, yields on the triple-A Municipal Market Data scale ended as much as four basis points firmer. The 10-year yield fell three basis points to 2.93% and the 30-year yield slid two basis points to 4.43%. The two-year finished flat at 0.43% for the 30th straight session.

Yields on the Municipal Market Advisors scale ended as much as three basis points lower. The 10-year and 30-year yields fell two basis points each to 3.08% and 4.53%, respectively. The two-year was flat at 0.55% for the ninth session.

Treasury yields continued to climb higher Wednesday afternoon. The benchmark 10-year yield climbed six basis points to 2.78% and the 30-year yield rose five basis points to 3.76%. The two-year yield rose three basis points to 0.40%.

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