Market Close: Retail Buyers Show Interest, Pushing Muni Prices Higher

Several new issues pricing Monday lured retail buyers into the municipal bond market as yields fell with Treasuries. Munis were stronger for a second session, extending gains following Friday’s worse-than-expected employment report.

Muni yields ended one to two basis points firmer, traders said, as the largest deal in the negotiated market priced for retail investors.

“It’s slightly firmer. Munis are underperforming Treasuries,” a Chicago trader said. “But there is not a whole lot of conviction.”

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.

Other traders said muni yields followed Treasury yields lower, though activity remained light.

“It should pick up now after Labor Day but we’re not seeing it yet. It’s still Monday,” a New York trader said. He added the market was mostly steady. “It’s not weaker.”

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.

Since Aug. 23, the day before Barron’s published a front page article highlighting Puerto Rico’s woes, yields have risen across the curve.

The five-year general obligation yield rose to 5.88% on Sept. 6 from 4.70% on Aug. 23. The 10-year yield jumped to 7.01% from 6.16% and the 30-year yield climbed to 8.14% from 7.21%.

The moves are even more dramatic from May 1 when the summer sell-off began. The five-year Puerto Rico GO climbed from 3.73% while the 10-year yield moved up from 4.81%. The 30-year yield increased from 5.47% on May 1.

In the secondary market, trades compiled by data provider Markit showed mostly weakening. Yields on Hawaii Department of Budget and Finance 4.6s of 2026 fell four basis points to 5.43%.

Yields on New York’s Tobacco Settlement Financing Corp. 5s of 2018 and Kentucky State Property and Buildings Commission 5.25s of 2019 slipped one basis point each to 1.85% and 2.36%, respectively.

Yields on North Carolina’s Charlotte-Mecklenburg Hospital Authority 5.25s of 2024 and Palm Beach County, Fla., 5s of 2021 fell one basis point each to 3.54% and 2.75%, respectively.

Monday, yields on the triple-A Municipal Market Data scale ended as much as two basis points lower. The 10-year yield slid two basis points to 2.99%, falling below 3.00% for the first time since Aug. 30. The 30-year yield fell one basis point to 4.48%. The two-year was steady at 0.43% for the 38th 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 3.12% and the 30-year yield dropped one basis point to 4.59%. The two-year closed unchanged at 0.55% for the 17th session.

Treasuries posted gains Monday for the second session. The benchmark 10-year and 30-year yields fell three basis points each to 2.90% and 3.84%, respectively. The two-year yield fell two basis points to 0.44%.

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