Market Post: Muni Yields Float as Deals Arrive

A stable municipal market crossed into the afternoon with the arrival of some of the week's larger deals.

Moderate activity in the secondary market speaks to a lack of paper past the short end of the yield curve. Prices appear strongest beyond 10 years, a trader in Illinois said, where participants are 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."

The market has seen light calendars the past two weeks, as it typically does at this time of year. Last week, only $1.78 billion in new deals reached the market. The previous week saw just $10.8 million in new issues.

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 Tuesday shows $7.83 billion planned.

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.

Barclays priced $115 million of Regional Public Transportation Authority transportation excise tax revenue bonds for the Maricopa County, Ariz., Public Transportation Fund. The bonds are rated AA-plus by Standard & Poor's and AA by Fitch.

Yields ranged from 0.42% with a 5.00% coupon in 2016 to 3.10% with a 5.25% coupon in 2025. Credits maturing in 2015 were offered in a sealed bid. The bonds are callable at par in 2024.

Yields on the Municipal Market Data triple-A scale appeared mixed Tuesday. Bonds maturing through seven years on the yield curve, as well as in 12 and 13 years, are steady. Thereafter, they're flat to one basis point lower. Meanwhile bonds maturing between eight and eleven years are flat to one basis point higher.

The 10-year triple-A yield and the 30-year each lost three basis points, to 2.61% and 3.98%, respectively. The two-year yield held at 0.34% for a sixth consecutive session.

The Municipal Market Advisors benchmark triple-A scale saw yields fall Monday by as much as three basis points after 2015. The 10-year triple-A yield fell two basis points to 2.61%. The 30-year plummeted two basis points to 4.18%, while the two-year stayed at 0.33%.

Treasuries have moved higher thus far. The 10-year yield has risen four basis points to 2.87%. The 30-year yield has climbed three basis points to 3.80%, while the two-year yield has inched up one basis point to 0.38%.

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