Market Post: Primary Deals Trade Higher in Secondary

Trading activity in the municipal bond market was stronger Wednesday afternoon after deals pricing in the primary market became available in the secondary market.

Hawaii, which issued over $800 million of bonds for institutional investors on Tuesday, traded stronger in the secondary market Wednesday. "With Hawaii and other deals in the primary market, the trade activity is pretty strong," a Chicago trader said.

Still, dealers were net sellers, with a sell ratio to customers of over 2 to 1, making up about 50% of all trading activity. Interdealer trades accounted for 25% and customer sell trades accounted for the remaining 25% of trades.

One remaining large deal on the negotiated calendar priced Wednesday. Citi sold to institutions $236 million of Massachusetts federal highway grant anticipation notes for the accelerated bridge program, following a two-day retail order period. The bonds are rated Aa1 by Moody's Investors Service, AAA by Standard & Poor's, and AA-plus by Fitch Ratings.

In institutional pricing, yields ranged from 0.44% with 3% and 4% coupons in a split 2016 maturity to 3.49% with a 4% coupon and 3.29% with 5% coupon in a split 2027 maturity. The bonds are callable at par in 2022. Yields were lowered between three and five basis points on bonds maturing between 2016 and 2019 after being lowered as much as three basis points in retail pricing. Yields maturing beyond 2020 were raised between one and five basis points in institutional pricing.

In the competitive market, Kentucky's Louisville-Jefferson County Sewer District sold $226.3 million of short term notes, rated MIG-1 by Moody's, SP-1-plus by Standard & Poor's, and F-1-plus by Fitch. The district also issued $100 million of bonds in the long-term market, rated Aa3 by Moody's, AA by Standard & Poor's, and AA-minus by Fitch.

Wells Fargo bought $226.3 million of subordinated bond anticipation notes with a yield of 0.383% and a 2% coupon.

Bank of America Merrill Lynch won the bid for $100 million of long-term revenue bonds. Yields ranged from 0.44% with a 3% coupon in 2015 to 4.63% with a 5% coupon in 2044. The bonds are callable at par in 2023.

On Tuesday, the triple-A Municipal Market Data scale ended as much as five basis points weaker. The 10-year and 30-year yields rose five basis points each to 2.51% and 4.11%, respectively. The two-year was steady for the sixth session at 0.34%.

Yields on the Municipal Market Advisors benchmark scale ended as much as five basis points weaker. The 10-year yield rose three basis points to 2.65% and the 30-year yield increased five basis points to 4.30%. The two-year was flat for the fifth session at 0.48%.

The Treasury yield curve steepened. The two-year yield fell one basis point to 0.30% and the benchmark 10-year yield slid two basis points to 2.65%. The 30-year yield rose one basis point to 3.77%.

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