Trading flows in the municipal bond secondary market accelerated as Wednesday's session progressed, but tax-exempt yields slackened.
Munis retained a solid tone in the lackluster session. New issuance, marked by the second retail-order period for the week's largest deal, failed to move the market in any definitive direction, according to traders.
"Everything was trading about flat-to-one-to-two basis points off, especially in the 10s and 30s," a trader in New York said. "It was good flow today, as orders were moving. But I think the hotness from the bid-tightening has definitely pared off from last week."
By midday, tax-exempt yields appeared to be faltering in the face of the apparent inactivity as retail investors held their cash. Few, if any, long bonds graced trading screens, which were dominated by fragmented bid-wanteds, a trader in New Jersey said.
Nonetheless, a sturdy tone lingered from
"We rallied from last week, and then we just calmed down," the trader said. "The last two days, everything has just been pretty flat."
Long-term supply is probably buttressing yields, traders say. Potential long-term volume is expected to pick up this week, to an estimated $4.88 billion.
Some help may be on the horizon. The Bond Buyer's 30-day visible supply for Wednesday shows that $7.08 billion is expected.
Few large offerings priced Wednesday, as a heavier haul is expected Thursday. JPMorgan, though, held a second retail-order period for the week's biggest issue, $896.2 million of New York City Transitional Finance Authority tax-secured subordinate bonds in three series.
The bonds are rated Aa1 by Moody's Investors Service and AAA 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 a split maturity in 2040.
Credits maturing between 2016 and 2034, as well as in 2040, 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 0.51% with coupons of 3.00% and 5.00% in a split maturity in 2016, to 3.90% with a 3.75% 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.
Between the first and second retail-order periods, yields on the second series were lowered two to three basis points in credits maturing in 2016 and 2017. They were raised one basis point for bonds maturing between 2022 and 2025.
For credits maturing in 2029 and 2030, yields were reduced by one basis point, while coupons were cut 12.5 basis points for both.
Information on yields in the third series, a $41.2 million remarketing, weren't available to be updated for the second day of retail at press time. Bonds in all three series are callable at par in 2024.
The deal generated roughly between $160 million and $200 million in orders on the first day, a second trader in New York said. The picture improved for the second day of retail, he added.
"They re-did a few of the coupons, which is great, as it might help retail get involved," he said. "I think it was priced right. There's just lack of interest right now. No one wants to put their money to work just yet; they all think rates are going to come so far up that they'll be able to get this great deal, and realistically, that's not going to happen."
On the competitive side of the market, Bank of America Merrill Lynch won $269.8 million of Florida Department of Transportation turnpike revenue bonds. They were rated Aa3 by Moody's and AA-minus by Standard & Poor's and Fitch.
Yields range from 0.20% with a 5.00% coupon in 2014 to 4.62% with a 4.50% coupon in 2043. The bonds are callable at par in 2023.
Trades in the secondary market painted a mixed picture Wednesday, according to data provider Markit. Yields on Golden State, Calif., Tobacco Securitization Corp. revenue 4.5s of 2027 fell five basis points to 6.15%.
Yields on Gainesville and Hall County, Ga., Hospital Authority revenue anticipation certificate 5.375s of 2040 and Port Authority of New York and New Jersey 4.5s of 2037 each slipped one basis point to 5.20% and 4.76%, respectively.
Yields on Massachusetts School Building Authority dedicated sales tax revenue 5s of 2028 and Maine Health and Higher Educational Facilities Authority revenue 5s of 2033 each rose two basis points to 3.40% and 4.56%, respectively.
Yields on the Municipal Market Data triple-A scale closed Wednesday marginally weaker across most of the curve. Bonds maturing beyond three years ended as much as two basis points higher.
The 10-year triple-A yield increased two basis points Wednesday to 2.64%. The 30-year inched up one basis point to 3.99%, while the two-year held at 0.34% for an eighth straight session.
Yields on the Municipal Market Advisors benchmark triple-A scale mostly weakened, rising across most of the curve by as much as two basis points.
The 10-year triple-A yield increased two basis points to 2.63%. The two-year rose one basis point to 0.34%, while the 30-year actually slipped one basis point to 4.18%.
Treasury yields closed Wednesday's session a shade weaker across the curve. The 10-year yield inched up one basis point to 2.88%.
The 30-year and two-year yields each ticked up one basis point to 3.82% and 0.40%, respectively.
