Puerto Rico's $3.5 billion general obligation issuance bonds, sold in March, drew much interest in the secondary this week because of the muni rally, traders say.
Trading volume for the 8% commonwealth GO of 2035 is 130.9% above its 100-day average, according to Bloomberg data. The bonds are trading at yields of 9.09%.
"Investors who own Puerto Rico debt at times are trying to catch a bid in a strong market," Fred Bacani, head of Fixed Income and Trading at Veritable LP in Newtown Square, Pa., said in an interview. "Typically, if the market is strong, there are bonds out for the bid for weaker credits."
Trading for all of the commonwealth's GOs was 71.2% over the 100-day average.
Muni yields fell for three straight days this week, starting on Tuesday. They dropped one basis point on the two year, four basis points on the 10 year and five basis points on the 30 year from May 23 to Thursday's market close.
"I think [the sell-off this week] had some effect on Puerto Rico trading," Jim Colby, chief municipal strategist at Van Eck Global, said in an interview.
Colby also noted that Puerto Rico trading is prompted by new announcements from the commonwealth's government. On Tuesday Puerto Rico Gov. Alejandro García Padilla signed into law a bill setting new rules for the commonwealth's electricity sector with goals of lowering electrical prices, and promoting renewable and clean burning sources of electricity.
"[The bill] might have somewhat of an impact because anything the governor does right now that is looked at in a positive or constructive fashion accrues to overall benefit of commonwealth," Colby said.
A trader in New York said besides the GOs, Puerto Rico electric and highway bonds drew interest.
Muni yields did rise slightly on Friday after the sell-off earlier in the week. Yields for bonds maturing in six years and in 20 to 30 years increased by as much as one basis point, according to Municipal Market Data's triple-A scale. Yields for seven to 19 years jumped by up to two basis points.
"Things might need to back up a bit this week with yields," a trader in New Jersey said. "Yields might have to increase to get the smaller number of people in the office during the holiday week interested in the deals."
"The MMD has drifted down over the past week or so a few basis points, the market is a bit flat," a second trader in New York said.
There are several large long-term deals scheduled to price next week, with the largest deal being $431.2 million certificates of participation from the Regional Transportation District of Colorado. The second biggest negotiated deal is the $340 million toll system refunding revenue bonds from the Miami-Dade, County Expressway Authority.
Los Angeles County is planning to sell $900 million tax and revenue anticipation notes on Wednesday.
In the competitive market the Metropolitan Atlanta Rapid Transportation Authority is scheduled to auction $274 million of revenue bonds on Thursday, and Columbus, Ohio, is expected to sell $258.3 million bonds on Wednesday.
Treasuries were mixed Friday afternoon, with the 10-year benchmark yield inching up one basis point to 2.47% and the two-year note slipping one basis point to 0.37%. The 30-year yield was unchanged at 3.32% from Thursday's market close.
Secondary market trading showed mostly weakening, according to data provider Markit.
The New Jersey Tobacco Settlement Financing Corporation 5s of 2041 rose one basis point to 6.73%, and the Florida Hurricane Catastrophe Fund Financing Corp. 2.995s of 2020 climbed 4 basis points to 2.731%.
The New Jersey Turnpike Authority revenue bond 5s of 2038 jumped 5 basis points to 3.81%, and the Texas Transportation Commission Highway Fund revenue bond 5s of 2034 fell one basis point to 2.93%.
