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Market Post: Munis Continue to See Lackluster Trading Day

The tax-exempt market continued to have an unusually quiet Tuesday afternoon as traders said the primary was quiet and bonds in the secondary looked too expensive to trade.

"Everyone is sleeping," a Los Angeles trader said. "It's just a very lackluster day. These rates are still pretty ridiculously low so a lot of people are sitting on their hands."

In the primary market, he said it's a "very light calendar from what I see. High-grade bonds are eaten up fast because there is tons of cash."

In the secondary, bonds looked too expensive. "In the secondary market you have to pay up for bonds. There is not a lot of interdealer trading there."

Other traders said the market was slightly weaker. "The new issues from last week are still floating around and are mostly trading at original or slightly cheaper," wrote Dan Toboja, vice president at Ziegler Capital Markets. "There has been a lot of headline news this week about a rally in the equity markets and the potential 'bond crash' in fixed income. So far the muni market is shrugging it off, but if retail investors begin to take notice, and fund flows begin to drop we will see a reaction in munis."

In the primary market, JPMorgan priced for institutions $1.5 billion JobsOhio Beverage System statewide lien liquor profits revenue bonds, rated A2 by Moody's Investors Service and AA by Standard & Poor's.

The $1.1 billion of taxable senior lien liquor profits revenue bonds, were priced at par to yield from 0.872% in 2015 to 4.532% in 2035. Spreads ranged from 60 basis points to 200 basis points above the comparable Treasury yield.

Details on institutional pricing for the $406.9 million tax-exempt bonds were not available by press time. On Monday, JPMorgan priced these bonds with yields ranging from 0.50% with a 3% coupon in 2015 to 3.39% with a 5% coupon in 2038. The bonds are callable at par in 2023.

Wells Fargo Securities priced $208.2 million of West Virginia University Board of Governors taxable and tax-exempt refunding and improvement revenue bonds, rated Aa3 by Moody's and A-plus by Standard & Poor's.

Yields on the first series, $136 million of tax-exempt bonds, ranged from 0.48% with a 3% coupon in 2014 to 3.70% with a 3.625% coupon in 2042. The bonds are callable at par in 2022.

The second series, $72.2 million of taxable bonds, were priced at par with coupons ranging from 0.532% in 2013 to 4.338% in 2042. Spreads ranged from 40 basis points to 165 basis points above the comparable Treasury yield.

Wells Fargo also priced $143.8 million of taxable Austin, Texas, Rental Car Special Facility revenue bonds, rated Baa1 by Moody's, A-minus by Standard & Poor's, and BBB-plus by Fitch Ratings.

The bonds were priced at par to yield 3.837% in 2022 and 5.46% in 2032. Bonds maturing in 2042 yielded 5.91% with a 5.75% coupon. Spreads ranged from 185 basis points to 275 basis points above the comparable Treasury yield. The bonds are callable at par in 2022.

In the competitive market, Citi won the bid for $325 million of Florida State Board of Education public education capital outlay refunding bonds, rated Aa1 by Moody's and AAA by Standard & Poor's and Fitch. Pricing details were not available by press time.

Most reads on the municipal bond market showed softening Monday after a weaker Friday.

The Municipal Market Data scale ended lower. The 10-year yield jumped four basis points to 1.79% while the 30-year yield increased three basis points to 2.82%. The two-year yield rose one basis point to 0.34% after trading steady at 0.33% for seven consecutive trading sessions.

The Municipal Market Advisors 5% coupon triple-A benchmark scale also showed weakening. The 10-year yield rose four basis points to 1.81% while the 30-year yield jumped three basis points to 2.91%. The two-year yield increased one basis point to 0.35% after trading steady at 0.34% for nine consecutive trading sessions.

After strengthening in the morning, Treasuries were weaker in the afternoon. The benchmark 10-year yield and the 30-year yield rose one basis point each to 1.99% and 3.17%, respectively. The two-year was steady at 0.29%.

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