The municipal market steadied through the arrival of some of the week's deals, including the retail pricing of its largest.
Cash-heavy investors
Tax-exempt yields, though mostly unchanged, rose modestly along some points of the curve while Treasuries, responding to yet more positive news from the Commerce Department, backed up a few basis points.
"There was a decent reception to new issues that are coming out; they're really taking the spotlight and leading the market," a trader in Los Angeles said "The market is feeling a little bit better. We're in the second week of January and finding there aren't a lot of bonds around."
Trading activity in the secondary slowed from recent sessions. By midday, yields appeared stable, traders said.
Moderate activity in the secondary market spoke to a lack of paper past the short end of the yield curve. Prices appeared strongest beyond 10 years, a trader in Illinois said, where participants were scrounging for scant paper, pushing tax-exempt yields lower.
"It's almost impossible to buy that stuff," the trader said. "The bids are getting so strong on that side. A lot of that paper's been sopped up. But as far as the bid-wanteds lists, there's a lot more bids going on in the stuff than there has been on average over the last two or three months — where a bond would usually get 10 to 15 bids, it's getting 25 to 30."
Investors want yield, he added. And while they saw an abundance of bonds in the 20- to 30-year range with attractive structures and prices roughly two weeks ago, today, there's almost nothing.
"It's just gotten sopped away," the trader said, "and it's just getting pushed lower and lower."
Potential long-term volume is expected to pick up this week, to an estimated $4.88 billion. More help may be on the way; The Bond Buyer's 30-day visible supply for Wednesday shows $7.08 billion expected.
In the week's biggest deal, JPMorgan priced for retail $896.2 million of New York City Transitional Finance Authority tax-secured subordinate bonds in three series. Another retail order period is expected Wednesday, followed by institutional pricing Thursday.
The bonds are rated Aa1 by Moody's Investors Service and triple-A by Standard & Poor's and Fitch Ratings.
Yields in the first series, $505 million of tax-exempt subordinate bonds, ranged from 4.10% with a 5.00% coupon in 2035 to 4.46% with a 4.375% coupon in 2040. Credits maturing between 2016 and 2034 weren't offered to retail; debt maturing in 2015 was offered in a sealed bid.
Yields in the second series, $350 million of tax-exempt subordinate refunding bonds, ranged from 0.54% with coupons of 3.00% and 5.00% in a split maturity in 2016 to 3.91% with a 3.875% coupon in 2030. Credits maturing in 2014 and 2015 were offered in a sealed bid; those maturing in 2026 and 2028 weren't offered to retail.
Yields in the third series, a $41.2 million remarketing, ranged from 3.27% with a 5.00% coupon in 2026 to 3.83% with a 5.00% coupon in 2031. Bonds in all three series are callable at par in 2024.
JPMorgan also priced $122.6 million of Fort Worth Independent School District unlimited tax school building bonds for Tarrant County, Texas. The Texas Permanent School Fund guarantee program grants the bonds triple-A ratings. The bonds hold underlying ratings of Aa1 by Moody's and AA by Standard & Poor's.
Yields ranged from 0.13% with a 2.00% coupon in 2014 to 3.96% with a 5.00% coupon in 2039. The bonds are callable at par in 2024.
The secondary market showed mostly strengthening, according to data provider Markit. Yields on California general obligation 5s of 2025 and 2023 fell three basis points to 3.28% and one basis point to 3.02%, respectively.
Yields on Triborough Bridge & Tunnel Authority revenue 5s of 2021 and Michigan Finance Authority revenue 5s of 202 each dropped three basis points to 2.39% and 1.73%, respectively. Also, yields on Miami-Dade County, Fla., special obligation 4.75s of 2043 rose two basis points to 4.82%.
There's a significant amount of demand in both the five- and 10-year parts of the yield curve, according to a second trader in Illinois, who operates in both parts. "Because of the steepness of the curve, like in 2020, we're seeing some activity from a lot of people looking for bonds in that maturity," she said, "because it's a pickup of more than 40 basis points from 2019 to 2020. We're seeing a lot of demand there."
Yields on the Municipal Market Data triple-A scale ended Tuesday mixed. Bonds maturing through seven years on the yield curve, in 12 and 13 years and beyond 20 years held steady. Those maturing between 14 and 20 years slipped one basis point, while bonds maturing between eight and eleven years inched up one basis point.
The 10-year triple-A yield rose one basis point Tuesday to 2.62%. The 30-year held at 3.98%, while the two-year remained unchanged at 0.34% for a seventh straight session.
Yields in the Municipal Market Advisors benchmark triple-A scale hovered Tuesday, rising and falling in select maturities across the curve by as much as one basis point. The 10-year triple-A yield held at 2.61%. The 30-year inched up one basis point to 4.19%, while the two-year remained at 0.33%.
Treasury yields moved higher. The 10-year yield climbed four basis points to 2.87%. The 30-year yield rose three basis points to 3.80%, while the two-year yield increased two basis points to 0.39%.
