The tax-exempt market’s rally gained strength in its third day after Minnesota’s new issue priced richer than the benchmark scale, pushing triple-A yields to the lowest in three months.
Minnesota came to market with $767.6 million of bonds and buyers weren’t shy to pay high prices. The bonds are rated Aa1 by Moody’s Investors Service and AA-plus by Standard & Poor’s and Fitch Ratings.
“Ratios are cheap and the Minnesota state deal priced tight,” a Chicago trader said. A big trade of Wisconsin general obligation bonds Thursday morning that traded five to six basis points tighter set the tone for the firmer market, he said.
The 10-year Municipal Market Data yield fell to its lowest since June 20 when it yielded 2.48%. On Thursday, the yield closed at 2.50%. The 30-year yield, closing at 4.08%, fell to its lowest since July 18 when it yielded 4.03%.
Bank of America Merrill Lynch won the bid for $373 million of Minnesota various purpose refunding GOs. Yields ranged from 0.55% with a 5% coupon in 2016 to 3.25% with a 3.125% coupon in 2026. The bonds are callable at par in 2023.
Wells Fargo won the bid for $282.6 million of unlimited GOs. Yields ranged from 0.17% with a 5% coupon in 2014 to 4.05% with a 4% coupon in 2033. The bonds are callable at par in 2023.
JPMorgan won the bid for $112 million of state trunk highway GOs. Yields ranged from 0.17% with a 2% coupon in 2014 to 4.04% with a 4% coupon in 2033. The bonds are callable at par in 2023.
The general market was busy Thursday, and sellers received good bids on their bonds, a second Chicago trader said. “There is lots of trading going on and firmer,” he said, adding Thursday’s trading volume was up 2.5% from the average of the last five Thursdays. Trading of Ohio’s Buckeye Tobacco Settlement Financing Authority debt was heavy Thursday afternoon, with $48.1 million changing hands.
Trading of Puerto Rico Sales Tax Financing Corp. was flat with the average of the previous five Thursday sessions at $35.8 million. “There are a lot more purchases from customers relative to sales to customers,” with a ratio of 2 to 1, this trader said.
In a block size trade of COFINA 0s of 2054, yields fell three basis points to 6.53% from 6.56% earlier Thursday morning.
Outside COFINA, general trading of Puerto Rico was down 45% from the last five Thursday. “Attention seems to be drifting a bit away from Puerto Rico today,” the trader said.
In other primary market deals, Citi priced for institutions $121.3 million of Tennessee Housing Development Agency residential finance program bonds in two series, rated Aa1 by Moody’s and AA-plus by Standard & Poor’s.
The first series, $31.3 million of bonds subject to the alternative minimum tax, were priced at par to yield 0.45% in 2014 to 1.60% and 1.70% in a split 2017 maturity. Bonds maturing in 2043 yielded 2.60% with a 4% coupon. The bonds are callable at par in 2023. Yields were lowered five basis points on bonds maturing in 2016 and 2017 from retail pricing Wednesday.
The second series, $90 million of non-AMT bonds, were priced at par to yield 1.65% and 1.75% in a split 2018 maturity to 4.65% in 2033. Bonds maturing in 2043 yielded 2.42% with a 4% coupon. The bonds are callable at par in 2023. Yields were lowered five and 10 basis points from retail pricing Wednesday.
In the secondary market, trades compiled by data provider Markit showed strengthening across the curve.
Yields on California’s Golden State Tobacco Securitization Corp. 5s of 2033 fell 10 basis points to 7.20% and Dallas Independent School District 5s of 2023 slipped seven basis points to 2.61%.
Yields on Los Angeles Unified School District 5s of 2025 and San Francisco Public Utilities Commission 5s of 2043 fell six basis points each to 3.11% and 4.51%, respectively.
Yields on Atlanta Airport 5s of 2025 fell five basis points to 3.35% and New York State Tollway Authority 5s of 2027 slid four basis points to 3.28%.
On Thursday, yields on the triple-A Municipal Market Data scale ended as much as seven basis points stronger following a four basis point rally Tuesday and Wednesday. The 10-year yield slid three basis points to 2.50% and the 30-year yield dropped seven basis points to 4.08%. The two-year was steady at 0.35% for the 10th session.
Yields on the Municipal Market Advisors benchmark scale ended as much as five basis points firmer. The 10-year yield fell four basis points to 2.65% and the 30-year yield slid five basis points to 4.24%. The two-year was steady at 0.54% for the second session.
Treasuries were weaker Thursday. The two-year and 10-year yields increased one basis point each to 0.32% and 2.51%, respectively. The 30-year yield rose two basis points to 3.61%.
In the secondary markets this week, activity rose in retail size trades of under 100 bonds, according to BondDesk Group.
Customer buy trades rose to 77,835 for the week ending Oct. 23, up from the previous week’s 64,121. It was the highest in five weeks.
Customer sell trades rose to the highest in four weeks, rising to 35,449 from 31,407 the previous week.
The ratio of buy to sell trades increased to 2.2 from 2.0 and was the highest in three weeks.
In par value traded, buy trades rose to $1.996 billion for the week ending Oct. 23, up from the previous week’s $1.606 billion and the highest in five weeks.
Par value of customer sell trades also increased to $965 million from the past week’s $848 million and was the highest in four weeks.
