The tax-exempt market ended on a steady to weaker tone as traders focused their attention on the primary market Tuesday.
Most market participants throughout the day said trading activity felt quiet, but the tone was still constructive.
“It feels like it has a little better tone but it’s hard to get a pulse,” a trader located in the Southwest region said. “One day it feels flat lined and another day it’s picking up. But it has a positive tone.”
This trader added that munis are trading off the 10-year Treasury. “As long as the 10-year Treasury is trading below 1.96%, the muni market has a bid. If it gets above that, bids start going away and it gets weaker. I think traders are worried about it breaking above 2.00%.”
And with muni yields still relatively low, he added zero-coupon bonds are outperforming. “There is a lot of trading in zeros. People are looking at that and seeing there is no reinvestment risk and they are picking up 20 to 30 basis points to the current coupon.”
Other market participants said the market still felt quiet. “Munis are dead on arrival today,” a Chicago trader said. “There are only a couple big block trades.”
He added that with yields so low, trading volume has started to quiet down. “Lately it’s brutal. Everyone hates the levels but the funds keep getting money in so they do minimal buying.”
In the primary market Tuesday, Citi priced for retail and institutions $207.1 million of Oregon general obligation bonds, rated Aa1 by Moody’s Investors Service and AA-plus by Standard & Poor’s and Fitch Ratings.
Yields on the first series, $22.4 million, ranged from 0.39% with a 3% coupon in 2015 to 3.43% with a 3.375% coupon in 2038. Bonds maturing in 2014 were offered via sealed bid. The bonds are callable at par in 2023.
Yields on the second series, $85.8 million of refunding bonds, ranged from 0.39% with a 4% coupon in 2015 to 2.64% with a 5% coupon in 2032. The bonds are callable at par in 2023.
Yields on the third series, $98.9 million of refunding bonds, ranged from 0.61% with a 4% coupon in 2016 to 2.64% with a 5% coupon in 2032. The bonds are callable at par in 2023.
Bank of America Merrill Lynch priced for retail and institutions $163.2 million of Oklahoma City Water Utilities Trust water and sewer system revenue refunding bonds, rated Aa1 by Moody’s and AAA by Standard & Poor’s.
Yields ranged from 0.82% with a 4% coupon in 2017 to 3.10% with a 5% coupon in 2042. The bonds are callable at par in 2023.
Raymond James & Associates priced $149.4 million of tax-exempt and taxable Lewisville, Texas, Independent School District unlimited tax refunding bonds.
The first pricing of $62.5 million of tax-exempt bonds were priced in two series. Yields on the first series, $39.6 million of tax-exempt bonds rated triple-A with insurance from the Permanent School Fund guarantee program, ranged from 0.76% with a 5% coupon in 2017 to 2.03% with a 3% coupon in 2023.
Yield on the second series, $22.9 million of bonds rated AA-plus by Standard & Poor’s and Fitch and were not guaranteed by PSF, ranged from 1.08% with a 4% coupon in 2018 to 2.47% with a 5% coupon in 2027. The bonds are callable at par in 2022.
Prices on the $86.9 million taxable portion were not yet available.
In the competitive market, Goldman, Sachs & Co. won the bid for $331.6 million of San Francisco Public Utilities Commission wastewater revenue bonds, rated Aa3 by Moody’s and AA-minus by Standard & Poor’s. Yields ranged from 2.01% with a 5% coupon in 2023 to 3.60% with a 4% coupon in 2042. The bonds are callable at par in 2022.
B of A Merrill won the bid for $152.4 million of Los Angeles, Calif., solid waste resources revenue bonds, rated Aa2 by Moody’s, AA by Standard & Poor’s, and AA-minus by Fitch.
Yields on the first pricing, $71.7 million of revenue bonds, ranged from 0.20% with a 4% coupon in 2014 to 2.50% with a 2.5% coupon in 2027. The bonds are callable at par in 2023.
Yields on the second pricing, $80.7 million of revenue refunding bonds, ranged from 0.17% with a 5% coupon in 2014 to 2.78% with a 3% coupon in 2029. The bonds are callable at par in 2023.
In the secondary market, trades compiled by data provider Markit showed mostly weakening.
Yields on Beaver County, Pa., Hospital Authority 5s of 2022 and Louisiana gas and fuels tax 4s of 2035 jumped four basis points each to 2.47% and 3.07%, respectively.
Yields on Michigan Tobacco Settlement Financing Authority 6s of 2048 and Prince George’s County, Md., 3s of 2033 increased two basis points each to 6.53% and 3.10%, respectively.
Still, other trades were stronger. Yields on Illinois 4s of 2025 dropped two basis points to 3.51% while Placentia-Yorba Linda, Calif., Unified School District 5s of 2024 fell one basis point to 2.19%.
On Monday, municipal bond market reads finished slightly weaker.
The Municipal Market Data triple-A GO scale ended steady to two basis points weaker. The 10-year yield rose one basis point to 1.81% while the 30-year yield increased two basis points to 2.88%. The two-year was steady at 0.32% for the second session.
The Municipal Market Advisors 5% coupon triple-A benchmark scale ended steady to one basis point higher. The 10-year and 30-year yields rose one basis point each to 1.84% and 2.95%, respectively. The two-year closed unchanged at 0.35% for the 12th session.
Treasuries ended weaker across the curve. The benchmark 10-year yield rose two basis points to 1.98% while the 30-year yield jumped three basis points to 3.19%. The two-year yield increased one basis point to 0.28%.
