Yields on the California deal were increased as much as 15 basis points in institutional pricing Thursday as traders said the price cuts were a signal of overall weakness in the general market.
“The cuts on the California bonds are what is really going on in the general market,” a San Francisco trader said. “It just feels like a bad time to be bringing a deal.”
After a two day retail order period, JPMorgan priced for institutions $2.15 billion of California various purpose GOs later Thursday. The bonds are rated A1 by Moody’s Investors Service, A by Standard & Poor’s, and A-minus by Fitch Ratings.
In institutional pricing, yields on the first series, $1.04 billion of various purpose GOs, ranged from 0.89% with 2% and 3% coupons in a split 2017 maturity to 4.13% with a 4% coupon and 3.89% with a 5% coupon in a split 2043 maturity. The bonds are callable at par in 2023. Yields were increased 15 basis points on the 2038 maturity and 13 basis points on the 2043 maturity. This comes after yields on the second retail order period were increased as much as two basis points from the first retail pricing.
Yields on the second series, $1.11 billion of various purpose GO refunding bonds, ranged from 0.89% with a 5% coupon in 2017 to 3.81% with a 4% coupon and 3.54% with a 5% coupon in a split 2033 maturity. The bonds are callable at par in 2023. Yields were increased between five and 15 basis points on maturities outside 2024 and as much as three basis points on maturities inside 2023. That comes after yields were increased as much as two basis points in the second retail pricing from the first retail order period.
Outside the California deal, the overall market felt weaker, too. “Even the North Carolina deal saw cuts,” the San Francisco trader said, referring to the $112 million deal from Durham County, N.C.
In the secondary, the market felt flat to weaker. “We are looking at the shorter call stuff within seven years and it’s grudgingly weaker by a few basis points,” he added, “Though it should be a lot weaker. We are seeing the same bonds day in and day out cut one to two basis points every day. They should just cut seven basis points and sell. But today it’s just a couple basis points weaker.”
On Wednesday, municipal bond market scales ended weaker for the third session.
Yields on the Municipal Market Data triple-A GO scaled ended as much as two basis points higher. The 30-year yield rose two basis points to 3.11% Wednesday. The 10-year closed steady at 1.99% while the two-year finished flat at 0.31% for the 17th consecutive session.
Yields on the Municipal Market Advisors 5% coupon triple-A benchmark scale climbed as much as two basis points. The 10-year yield and the 30-year yield inched up one and two basis points, respectively, to 2.01% and 3.18%. The two-year held at 0.33% for the 12th session.
After posting losses Thursday morning, Treasuries gained and traded mostly flat to Wednesday’s levels. The two-year and benchmark 10-year yield were flat at 0.27% and 2.03%, respectively. The 30-year yield rose one basis point to 3.23%.
