Market Post: Trading Volume Up As Buyers Emerge in Secondary

The tax-exempt market firmed Thursday afternoon with an increase in trading volume as sellers received good bids for bonds in the secondary market.

“There is lots of trading going on and firmer,” a Chicago trader said, adding Thursday’s trading volume was up 2.5% from the average of the last five Thursdays. Ohio’s Buckeye Tobacco Settlement Financing Authority saw heavy trading Thursday afternoon, with $48.1 million.

Trading of Puerto Rico Sales Tax Financing Corp. bonds was flat with the average of the previous five Thursday sessions with $35.8 million traded. “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.

Later Thursday, Citi is expected to price for institutions $122 million of Tennessee Housing Development Agency residential finance program bonds in two series, rated Aa1 by Moody’s Investors Service and AA-plus by Standard & Poor’s.

In retail pricing Wednesday, the first series, $32 million of bonds subject to the alternative minimum tax, were priced at par to yield 1.20% and 1.30% in a split 2016 maturity and 1.65% and 1.75% in a split 2017 maturity. Bonds maturing in 2014 and 2015 were offered via sealed bid and those maturing in 2043 were not offered for retail. The bonds are callable at par in 2023.

The second series, $90 million of non-AMT bonds, were priced at par to yield 1.75% and 1.85% in a split 2018 maturity to 4.70% in 2033. Bonds maturing in 2043 were not offered for retail and all bonds are callable at par in 2023.

On Wednesday, yields on the triple-A Municipal Market Data scale ended as much as four basis points stronger following a four basis point rally Tuesday. The 10-year and 30-year yields fell four basis points each to 2.53% and 4.15%, respectively. The two-year was steady at 0.35% for the ninth session.

Yields on the Municipal Market Advisors benchmark scale also ended as much as four basis points firmer. The 10-year yield fell four basis points to 2.69% and the 30-year yield slid three basis points to 4.29%. The two-year yield fell one basis point to 0.54%.

Treasuries were slightly weaker across the curve. The benchmark 10-year and 30-year yields rose one basis point each to 2.51% and 3.60%, respectively. The two-year yield increased one basis point to 0.32%.

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