The tax-exempt market ended on a steady tone Thursday after posting losses earlier in the week.
Traders said that after leftover balances from deals were sold, the market was able to land on firmer footing.
Still, two major deals have been postponed this week — a $500 million Illinois deal and a $258 million Wisconsin deal — showing investors the market is still skittish.
Goldman, Sachs & Co. was expected to price on Thursday $258 million of Wisconsin transportation revenue bonds, rated Aa2 by Moody’s Investors Service and AA-plus by Standard & Poor’s and Fitch Ratings. The deal was postponed due to market conditions.
“We were ready to go today, but decided against it,” said David Erdman at the Wisconsin Capital Finance Office. “We are monitoring the market and will move forward when the market has better tone.”
Pete Stare, an underwriter at FirstSouthwest, said the market started to steady after weakening earlier in the week. “The first three days of the week were fairly ugly. Balances were left over from last week and deals coming to market had more balances than people had been underwriting. The market felt heavy.”
Thursday afternoon, munis started to even out after Treasuries stabilized. “Treasuries found stability and munis reacted same,” Stare said. “One deal in Texas saw some bumps while another just got done. But it beats the heck out of the first part of the week.”
He added that the two deals that were postponed in the primary market took a little pressure off munis. “It’s mostly steady now. In the secondary, guys are better sellers than buyers because they are heavier than they want to be.”
In the morning trading session, traders had already noticed a significant difference from earlier in the week. “The better tone in the market means it’s just not sinking,” an Atlanta trader said. “It’s not necessarily going up but the sinking has stopped. I had one good trade so far today. I don’t feel like I have to be cutting like all the other days this week.”
In the primary market, the trader added, there are still some balances left over while secondary trading is still relatively quiet. “People aren’t puking bonds today,” he added. “There’s not that nervous tone out there.”
On Thursday, Goldman priced for institutions $335 million of Bay Area Water Supply and Conservation Agency tax-exempt and taxable revenue bonds for the Capital Cost Recovery Prepayment Program. The bonds are rated Aa3 by Moody’s and AA-minus by Standard & Poor’s.
In institutional pricing Thursday for the $237.5 million tax-exempt series, yields ranged from 0.28% with a 1% coupon in 2014 to 3.15% with a 4% coupon and 2.90% with a 5% coupon in a split 2034 maturity. The bonds are callable at par in 2023.
Yields were lowered as much as six basis points on maturities inside 2024 but were increased seven basis points on bonds maturing in 2028 and five basis points to bonds maturing in 2033.
Details on the taxable series was not yet available.
Barclays priced $132 million of Yale-New Haven Hospital taxable bonds, rated Aa3 by Moody’s and A-plus by Standard & Poor’s. The bonds were priced at par with a 4.366% coupon in 2043. The bonds had a spread of 120 basis points above the comparable Treasury yield.
In the secondary market, traders said California bonds were trading higher after the state was upgraded by Standard & Poor’s one notch to A.
“I am seeing California bonds trade up in the secondary,” a trader at Markit said, adding that not just GO’s, but all California bonds were higher. “The news seems to be giving all California bonds a little bit of a pop.”
Yields on California 5s of 2017 dropped five basis points to 0.88% while California 3s of 2024 fell two basis points to 2.38%.
Other trades in the secondary market showed firming, according to data compiled by Markit.
Yields on Ohio State Water Development Authority 5.5s of 2022 dropped five basis points to 1.87% while Knoxville, Tenn., 4s of 2022 fell four basis points to 1.96%.
Yields on New York’s Triborough Bridge and Tunnel Authority 5s of 2030 and Texas 5s of 2036 fell three basis points each to 2.66% and 2.72%, respectively.
Municipal bond market reads showed a stronger market after weakening Monday through Wednesday.
Yields on the Municipal Market Data triple-A GO scale fell. The 30-year dropped one basis point to 2.86%. The two-year finished flat at 1.82% while the two-year closed steady at 0.34% for the fourth session.
The Municipal Market Advisors 5% coupon triple-A benchmark scale also showed steady to lower yields. The 10-year yield and the 30-year yield finished steady at 1.84% and 2.94%, respectively. The two-year held steady at 0.35% for the fourth session.
After a mostly steady session, the Treasury yield curve flattened. The benchmark 10-year yield dropped three basis points to 1.97% while the 30-year yield fell two basis points to 3.17%. The two-year yield increased one basis point to 0.28%.
