Market Post: Munis Head Lower on Mixed Primary Reception, Treasuries

The tax-exempt market headed lower on Thursday for a second consecutive session as traders cut prices in the secondary market following mixed reception of primary deals throughout the week.

Some traders said high-yield credits, like double-B rated Guam Waterworks Authority, were well received while Jefferson County and lower-rated hospital bonds cut prices. Also working against the municipal bond market was a selloff in Treasuries late Wednesday afternoon that pressured munis as the market opened on Thursday.

"It's weaker today and I've gotten pretty bad bids on my bonds," a New York trader said. "I think it's a delayed reaction to Wednesday too when munis didn't weaken as much as Treasuries. But I think now it's stabilizing."

With most of the new deals issued earlier in the week, the last remaining deal over $1 billion took all the attention on Thursday. Wells Fargo priced for institutions $1.5 billion Port Authority of New York and New Jersey bonds, following a retail order period Wednesday. The bonds are rated Aa3 by Moody's and AA-minus by Standard & Poor's and Fitch.

Yields on the first series of $473.6 million of bonds subject to the alternative minimum tax, ranged from 0.51% with a 4% coupon in 2015 to 5.12% with a 5% coupon in 2043. The bonds are callable at par in 2023. Yields were raised one to three basis points on selective maturities between 2023 and 2038.

Yields on the second series of $917.3 million ranged from 0.41% with a 4% coupon in 2015 to 4.62% with a 5% coupon in 2043. The bonds are callable at par in 2023. Yields were lowered one basis point each from retail pricing on bonds maturing in 2015 and 2016 but raised one to two basis points on bonds maturing between 2022 and 2029.

Yields on the third series of $109.2 million ranged from 0.32% with a 3% coupon in 2015 to 2.49% with a 5% coupon in 2021.

On Wednesday, the triple-A Municipal Market Data scale ended as much as three basis points weaker, reversing a four-day positive streak. The 10-year yield rose one basis point to 2.62% and the 30-year yield climbed three basis points to 4.12%. The two-year closed unchanged for the fifth session at 0.33%.

Yields on the Municipal Market Advisors benchmark scale ended as much as four basis points higher after posting mostly gains for five sessions. The 10-year yield rose one basis point to 2.69% and the 30-year yield climbed three basis points to 4.33%. The two-year was steady for the third session at 0.38%.

Treasuries were stronger Thursday afternoon after yields traded mostly flat in the morning session. The benchmark 10-year yield fell one basis point to 2.79% and the 30-year yield dropped two basis points to 3.89%. The two-year was steady at 0.28%.

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