Market Close: Wisconsin Jump Starts Activity In Quiet Session

The large Wisconsin competitive sale helped spur activity in the tax-exempt market Tuesday in an otherwise unchanged trading session.

Traders noted the market was quiet and prices mostly unchanged until the deal came. “It was selling off a little, but then Wisconsin came in big and got a pretty good number,” a New York trader said.

JPMorgan won the bid for $410.3 million of Wisconsin general obligation bonds, rated Aa2 by Moody’s Investors Service and AA by Standard & Poor’s and Fitch Ratings.

Yields ranged from 0.195% with a 2% coupon in 2014 to 3.06% with a 4% coupon in 2033. The bonds are callable at par in 2022.

Earlier, traders said the market felt flat. “It’s all about the new issues so that’s really the focus,” a second New York trader said. “The market isn’t changed but it’s definitely driven by new product.”

He added competitive deals look like they are coming right on the market. “Competitive bids look fair. There is not a better bid or a worse bid. It’s unchanged.”

“It’s flatlining,” a Chicago trader said. “There is just not a lot of activity. It’s a little more focused on the competitive market but overall the calendar is light if you take out big situations.”

Outside the Wisconsin competitive deal, a flurry of several large deals hit the primary Tuesday.

Wells Fargo priced $386 million of California State Public Works Board lease revenue bonds, rated A2 by Moody’s, A-minus by Standard & Poor’s, and BBB-plus by Fitch.

Yields on the first series, $59.5 million of lease revenue bonds issued on behalf of the Judicial Council of California for the Yuba City Courthouse, ranged from 0.79% with 2% and 4% coupons in a split 2016 maturity to 3.80% with a 5% coupon in 2038. The bonds are callable at par in 2023.

Yields on the second series, $326.5 million of lease revenue refunding bonds issued on behalf of the Department of State Hospitals for Coalinga State Hospital, ranged from 0.56% with a 4% coupon in 2015 to 3.43% with a 5% coupon in 2029. The bonds are callable at par in 2023.

Barclays priced $295 million of County of Muskingum, Ohio, hospital facilities revenue bonds for the Genesis health care System Obligated Group Project, rated Ba1 by Moody’s and BB-plus by Standard & Poor’s.

Yields ranged from 2.35% with a 5% coupon in 2016 to 5.20% with a 5% coupon in 2048. The bonds are callable at par in 2023.

JPMorgan priced $262.6 million of Central Texas Regional Mobility Authority revenue refunding bonds in two series.

The first series, $157.7 million of senior lien revenue refunding bonds, were rated Baa2 by Moody’s and BBB-minus by Standard & Poor’s. Yields ranged from 0.84% with a 3% coupon in 2014 to 4.12% with a 5% coupon in 2043. The bonds are callable at par in 2023.

The second series, $104.9 million of subordinate lien revenue refunding bonds, were rated Baa3 by Moody’s and BB-plus by standard & Poor’s. Yields ranged from 1.24% with a 3% coupon in 2014 to 4.73% with a 5% coupon in 2042. The bonds are callable at par in 2023.

Elsewhere in the competitive, Kentucky’s Louisville and Jefferson County Sewer District sold $234.4 million of bonds in two pricings, rated Aa3 by Moody’s, AA by Standard & Poor’s, and AA-minus by Fitch.

Bank of America Merrill Lynch priced $118.6 million of revenue bonds. Yields ranged from 0.47% with a 5% coupon in 2016 to 3.68% with a 4% coupon in 2038. The bonds are callable at par in 2023. Details on the second pricing of $111.4 million were not yet available.

Citi won the bid for the second pricing of $115.8 million. The bonds yielded 3.46% with a 4% coupon in 2035 and 3.51% with a 4% coupon in 2036. The bonds are callable at par in 2023.

In the secondary market, trades compiled by data provider Markit showed mostly stronger trades.

Yields on New York City Municipal Water Finance Authority 5.882s of 2044 and California 5s of 2037 slid one basis point to 4.32%.  Yields on Ohio 5s of 2022 dropped one basis point to 1.33%.

Outside trading activity Tuesday, the Chicago trader said generally activity is focused in the 10-year range. “That is a staple part of the curve and business inside 10 years is being driven by customer orders.”

While munis look cheap — ratios are all over 100% — traders are still concerned about the absolute low yields. And some think the stock market and high dividend paying stocks has the potential to take money out of munis. “With ratios over 100% in key spots, that’s normally a great value. But right now yields are so low that it is an overall asset class decision and not a bond decision.”

Still, outflows have been muted and have come mainly from the short-term money market funds. “People aren’t necessarily selling bonds, but they are taking cash out of short-term money markets and putting it to work in other asset classes.”

Municipal bond scales ended steady to one basis point weaker Tuesday after a mostly steady session Monday.

Yields on the Municipal Market Data 5% triple-A GO scale ended flat. The 10-year was steady at 1.70% for the fifth session and the 30-year closed unchanged at 2.90% for the third trading session. The two-year closed steady at 0.29% for the 13th session.

Yields on the Municipal Market Advisors 5% scale ended flat to one basis point higher. The 10-year was flat at 1.76% and the 30-year closed unchanged at 3.02% for the fourth session. The two-year was flat at 0.32% for the 13th session.

Treasuries ended weaker after a choppy session. The benchmark 10-year yield rose one basis point to 1.71% and the 30-year yield increased two basis points to 2.90%. The two-year was flat at 0.23%.

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