Market Post: Taxable Primary Better Received Than Residual Secondary

Taxable municipal bond issues continued to roll out in the primary as those deals garnered more attention than many of their tax-exempt counterparts.

“Taxable is getting a lot of attention with Harvard and Stanford deals coming in recent weeks,” a New York trader said.

Outside the taxable deals, the new issues in general were well received. “The primary has been well received this week and last week with a Treasury rally and a decrease in supply.”

In the secondary, most trades appeared to be leftover names from earlier in the year. “The secondary is a lot of residual pieces left over from earlier competitive deals in the year with lower coupons or aggressive pricing.”

Wells Fargo is expected to price $200 million of Illinois Finance Authority taxable debt for the University of Chicago. The deal comes after a $150 million tax-exempt portion Tuesday sold by Morgan Stanley. The bonds are rated Aa1 by Moody’s Investors Service, AA by Standard & Poor’s, and AA-plus by Fitch Ratings.

Ramirez & Co. priced $127.6 million of Illinois Housing Development Authority federally taxable housing bonds, rated Aa3 by Moody’s and AA by Standard & Poor’s.

The bonds were priced at par ranging from 2015 to 2047. Bonds maturing in 2014 were offered via sealed bid. Spreads ranged from 60 basis points to 235 basis points above the comparable Treasury yield. The bonds are callable at par in 2023.

Morgan Stanley priced $204.6 million of Colorado’s Regional Transportation District sales tax refunding bonds, rated Aa2 by Moody’s, AA-plus by Standard & Poor’s, and AA by Fitch.

Yields ranged from 2.92% with a 5% coupon in 2027 to 3.50% with a 4.25% coupon in 2036.

In the competitive market, triple-A rated Massachusetts Water Pollution Abatement Trust auctioned $206.3 million in two pricings, including $189.6 million and $16.7 million.

Bank of America Merrill Lynch won the bid for $189.6 million of state revolving fund bonds. Yields ranged from 0.17% with a 5% coupon in 2014 to 3.04% with a 5% coupon in 2043. The bonds are callable at par in 2023.

Inside 2026, spreads ranged from two basis points through the Municipal Market Data scale to eight basis points over. Outside 2027, yields were priced 15 basis points above MMD.

Morgan Stanley won the bid for $16.7 million. Pricing details were not yet available.

Municipal bond scales ended up to two basis points weaker Tuesday after yield rose as much as six basis points Monday.

Yields on the Municipal Market Data triple-A GO scale finished as much as yeo basis points higher. The 10-year and 30-year yields increased two basis points each to 1.75% and 2.89%, respectively. The two-year finished flat at 0.29% for the 23rd session.

Yields on the Municipal Market Advisors 5% scale ended also ended up to two basis points higher. The 10-year yield rose two basis points to 1.81% and the 30-year yield increased one basis point to 3.02%. The two-year finished unchanged at 0.32% for the 23rd session.

Treasuries posted strong gains Wednesday afternoon. The two-year and 30-year yields fell one basis point each to 0.23% and 2.99%, respectively. The benchmark 10-year yield slid two basis points to 1.77%.

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