Municipal bonds strengthened on the long-end after receiving weak economic data on Wednesday.
Yields for 10- to 22-year maturities fell as much as one basis point, the 23-year slid up to two basis points, 24- to 27-year maturities dipped as much as three basis points, and 28- to 30-years declined two to four basis points.
"We saw some strength at the start of the day as that nasty new home sales number, and the manufacturing number came out," a trader in Virginia said.
New home sales fell sharply in March -- 14.5% to a 384,000 annual rate from 440,000 in February - in contrast to analysts' projection of 455,000 sales.
Markit's U.S. manufacturing sample dipped to 55.4 for March compared to 55.5 in February. Analysts had predicted the manufacturing sample would rise to 56.3 in March. Also distressing, employment growth lagged other sectors at 53.8.
"There was an exceptionally weak month-over-month housing number printed this morning," the trader from Virginia said. "People are coming to the realization that housing is not going to be one of the primary drivers of growth. With [mortgage interest] rates moving higher it's going to be harder for housing to get back on its feet."
The plunge in March's new home sales is notable because the Federal Reserve had speculated that weakness seen in January and February was the result of severe weather and suggested the market might have been more positive than the numbers belied. Wednesday's report indicated continued softness despite improved weather.
A trader in New York said he anticipated the number would have been stronger because of the nicer weather. "The weather has been better, you can actually do stuff outside," he said, and projected this low sales number will have an impact on municipal bonds.
"The market is certainly looking for something to react to," he said. "Every time we see something about the Ukraine the market reacts. Now it is just looking for something else to respond to, new home sales could do it."
Investors also said municipal bond prices were boosted slightly this morning because Treasury yields fell. The 10-year benchmark slipped two basis points to 2.70% and the two-year notes dropped five basis points to 0.47%. The 30-year yields fell two basis points 3.48%.
"Treasuries drag munis with them," a trader in Chicago said.
Janney Capital Markets said in a report released on Wednesday that Treasuries are trading a bit stronger after the Russian government rejected the bids for two Russian bond auctions, five years and nine years, because yields were too high.
The trader in Virginia also said Treasuries strengthening, and long muni yields' subsequent drop, was partially due to the crisis in the Ukraine.
"Munis tend to follow Treasuries, and I think you had some strength in Treasuries early this morning because of reports of Russian and Ukraine tensions present," he said. "There was significant late day sell-off Thursday right before Easter break. After this weekend though, and early this week, it seems the situation is not fully diffused."
Bank of America Merrill Lynch brought a three-part $1.3 billion New Jersey Economic Development Authority deal to the market on Wednesday.
The $599.8 million of school facilities construction refunding bonds, up $72.8 million from the $527 million offered in the retail order period, were priced to yield from 1.40% with a 5% coupon in 2018 to 3.82% with a 5% coupon in 2031.
The $60 million second series of refunding bonds was priced to yield from 3.90% with a 5% coupon in 2032 to 4.25% with a 4% coupon in 2035. Both series are callable at par in 2024.
Pricing was unavailable on the $632 million of school facilities construction taxable refunding bonds. The deal received an A1 rating from Moody's Investors Service, an A from Standard & Poor's and an A-plus from Fitch Ratings.
Raymond James & Associates will offer to retail $150 million of residential finance program non-alternative minimum tax and alternative minimum tax bonds for the Tennessee Housing Development Agency.
The $26 million of alternative minimum tax residential finance program bonds were priced at par to yield from 0.65% in 2016 to 1.10% in 2017. Two maturities in 2015 will be sold by sealed bids. Retail orders were unavailable for bonds maturing in 2039. The bonds are callable at par in 2024.
The $119.5 million of non-alternative minimum tax residential finance program bonds were priced at par to yield from 1.20% in 2018 to 4.05% in 2034. Retail orders were unavailable for bonds maturing in 2039. The bonds are callable at par in 2024.
The $4.5 million of residential finance program bonds were priced at par to yield from 0.55% in 2016 to 0.95% in 2017. A 2015 maturity will be sold by sealed bid. This series does not have a call option. The deal is rated Aa1 by Moody's and AA-plus by S&P.
The city of Lubbock, Texas, will offer $110.1 million of refunding GOs and tax and waterworks system surplus revenue certifications of obligation bonds. The bonds mature serially from 2014 to 2034. Raymond James is the lead underwriter for the deal. The GOs are rated Aa2 by Moody's and AA-plus by both S&P and Fitch.
Citigroup Global Markets will bring $110 million of revenue bonds to the market Wednesday for the Illinois Health Facilities Authority. The deal is rated Aa2 by Moody's and AA by S&P.
In the competitive market, JP Morgan Securities won the bid for $225 million of taxable general obligation working cash notes for the Regional Transportation Authority of Illinois. The GOs are rated AA by Fitch.
