Market Post: Munis Gain, But Underperform Treasuries

The tax-exempt market continued to post gains Monday, though it underperformed its Treasury counterparts, as retail buyers were offered several deals in the primary market over $100 million.

"It's slightly firmer. Munis are underperforming Treasuries," a Chicago trader said. "But there is not a whole lot of conviction." This trader added the market was one to two basis points stronger.

Generally speaking, as yields have backed up over the past several months, retail buying activity has picked up, he said. That continued Monday with several deals offered for retail buyers Monday, including the largest deal on the negotiated calendar.

Raymond James & Associates held a retail order period for $385.3 million of Miami-Dade County, Fla., seaport revenue bonds. The bonds are rated A3 by Moody's Investors Service and A by Fitch Ratings. Institutional pricing is expected Tuesday.

Yields on the first series of $245.3 million ranged from 1.76% with a 4% coupon in 2017 to 5.625% priced at par in 2042. Bonds maturing between 2024 and 2038 were not offered for retail. The bonds are callable at par in 2023.

The second series of $110.7 million subject to the alternative minimum tax was not offered to retail. The third series of $11.9 million was offered via sealed bid.

The fourth series of $17.5 million of bonds subject to the AMT ranged from 1.56% with a 4% coupon in 2016 to 5.12% with a 6% coupon in 2026. Bonds maturing in 2014 and 2015 were offered via sealed bid. The bonds are callable at par in 2023.

RBC Capital Markets priced $225.4 million of Leander Independent School District for Williamson and Travis Counties unlimited tax refunding bonds. The bonds are rated AA-minus by Standard & Poor's. The first two series were rated triple-A with insurance from the Permanent School Guarantee Program.

In the first series of $110.2 million, yields ranged from 3.74% with a 5% coupon in 2026 to 4.50% with a 5% coupon in 2034. The bonds are callable at par in 2023.

The second series of $48.9 million of capital appreciation bonds had maturities ranging from 2014 to 2025 with a yield to maturity ranging from 0.58% to 4.31%. The bonds are callable at par in 2023.

The third series of $21.5 million of current interest bonds yielded 3.41% with a 5% coupon in 2023 and 3.59% with a 5% coupon in 2024. The bonds are callable at par in 2023.

The fourth series of $44.8 million of capital appreciation bonds had maturities ranging from 2014 to 2022 with a yield to maturity of 0.78% to 3.83%.

JPMorgan priced for retail $193.9 million of Monroe County Industrial Development Corp. revenue bonds for the University of Rochester project. The bonds are rated Aa3 by Moody's and AA-minus by Standard & Poor's and Fitch.

Yields on the first series of $118.7 million ranged from 0.63% with a 3% coupon in 2015 to 3.77% with a 5% coupon in 2024. Bonds maturing between 2025 and 2043 were not offered for retail. The bonds are callable at par in 2023.

Yields on the second series of $75.2 million ranged from 0.33% with a 2% coupon in 2014 to 5.07% with a 5% coupon in 2038. Bonds maturing in 2043 were not offered for retail. The bonds are callable at par in 2023.

Still, one large mutual fund continued to sell Puerto Rico longer-maturing bonds, a San Diego trader, in a sign that selling pressure remains for the commonwealth.

Friday, yields on the triple-A Municipal Market Data scale ended as much as three basis points lower. The 10-year yield slid three basis points to 3.01% and the 30-year yield dropped two basis points to 4.49%. The two-year was steady at 0.43% for the 37th straight session.

Yields on the Municipal Market Advisors scale also ended as much as three basis points firmer. The 10-year fell two basis points to 3.14% and the 30-year yield dropped one basis point to 4.60%. The two-year closed unchanged at 0.55% for the 16th session.

Treasuries continued to rally Monday. The two-year and benchmark 10-year yields slid two basis points each to 0.44% and 2.91%, respectively. The 30-year yield fell three basis points to 3.84%.

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