NEW YORK – The California municipal market was firmer Tuesday as the Los Angeles Department of Water and Power priced $760.2 million of taxable Build America Bonds and participants begin looking towards the impending Thanksgiving holiday after a fairly active morning.
“It was busier earlier on, but as the session waned, so did the interest of a lot of people in getting deals done,” a trader in Los Angeles said. “It’s been a turbulent little stretch of time here this month, but it looks like people are shifting their focus away from munis and onto turkey finally. With that said, we’re better about three basis points or so.”
In the new-issue market Tuesday, Goldman, Sachs & Co. priced $760.2 million of taxable Build America Bonds for the Los Angeles Department of Water and Power.
The BABs mature in 2041 and 2045. Bonds maturing in 2041 yield 7.00% priced at par, or 4.55% after the 35% federal subsidy. Bonds maturing in 2045 were priced to yield 240 basis points over the 30-year Treasury yield.
The credit is rated Aa3 by Moody’s Investors Service and AA-minus by both Standard & Poor’s and Fitch Ratings.
The Municipal Market Data triple-A scale yielded 2.82% in 10 years Tuesday, down five basis points from Monday’s 2.87%, while the 20-year scale yielded 3.97%, down five basis points from Monday. The scale for 30-year debt dropped five basis points to 4.31% Tuesday from 4.36% Monday.
Tuesday’s triple-A muni scale in 10 years was at 102.2% of comparable Treasuries and 30-year munis were at 103.4%, according to MMD. Meanwhile, 30-year tax-exempt triple-A general obligation bonds were at 111.9% of the comparable London Interbank Offered Rate.
The Treasury market showed gains Wednesday. The benchmark 10-year note was quoted recently at 2.77% after opening at 2.81%. The 30-year bond was quoted recently at 4.18%, after opening at 4.21%. The two-year note was quoted recently at 0.46% after opening at 0.48%.
In economic data released Tuesday, real gross domestic product increased 2.5% in the third quarter, revised higher from 2.0% growth seen in the advance estimate last month and exceeding economists’ estimates as the core personal consumption expenditures number was unrevised.
Core personal consumption expenditures, the Federal Reserve’s preferred measure of inflation, increased 0.8% for the quarter, unrevised from the initial estimate and the smallest quarterly increase since 2008.
Economists expected GDP would increase 2.4% for the quarter and core PCE would increase 0.8%, according to the median estimate from Thomson Reuters.
Existing homes sales fell 2.2% in October to a seasonally adjusted 4.43 million. Sales in September were unchanged at 4.53 million. Economists expected 4.500 million sales for the month, according to the median estimate from Thomson Reuters.
Previous Session's Activity
The most actively traded security in the state yesterday was California 3s of 2011, which traded 514 times at a high of 100.989 and a low of 100.525.
