NEW YORK — Smaller deals reaching the primary are providing some guidance to the municipal market Tuesday.
This is particularly true for competitive deals, where bid sides have held, a trader in Florida said. Larger new issues, though, have yet to provide clarity. All of the new issuance hitting the market is slowing down the secondary, the trader added.
“Customers know the supply is going to be stronger than in the past several weeks,” he said. “They’ll have plenty to choose from, so they’re waiting for a lot of the pricings.”
As some of the week’s larger new issues hit the market, munis are slightly firmer, from the middle of the curve on out, according to the Municipal Market Data scale. The muni yield curve continues to flatten as yields are steady out to seven years. Beyond that, they’re flat to two basis points lower.
The 10-year muni yield remained at 2.13%, or six basis points up from the all-time low recorded early last week. The 30-year yield fell three basis points to 3.67%, and the two-year yield stayed at 0.32%.
Treasuries are roughly flat heading into Tuesday afternoon. The benchmark 10-year Treasury yield has held steady at 1.95%. The 30-year yield has hovered at 3.22%. The two-year yield has ticked up one point to 0.17%.
The market expects volume to be up substantially this week, at roughly twice the typical week this year. The industry anticipated $8 billion will come to market. This is up from the average $4.6 billion issued weekly thus far in 2011, and last week’s revised $6.2 billion.
In the primary market, Bank of America Merrill Lynch priced $2.51 billion of California tax-exempt various purpose general obligation bonds and refunding bonds in two issues. The bonds are rated A1 by Moody’s Investors Service, and A-minus by Standard & Poor’s and Fitch Ratings.
Yields for the first series, $1.26 billion of tax-exempt various purpose GOs, range from 1.13% with a 3.00% coupon in 2015 to 4.80% with a 5.00% coupon in 2041. No more orders are being accepted for some maturities in 2015 through 2022, and 2028.
The yields stand 69 basis points higher than MMD at the five-year mark, and 113 basis points higher than MMD at the 30-year mark.
Yields for the second series, $1.25 billion of tax-exempt GO refunding bonds, range from 0.67% with a 3.00% coupon in 2013 to 4.57% with a 5.00% coupon in 2031. Credits maturing in 2012 are offered in a sealed bid. No more orders are being accepted for debt in two maturities in 2022, as well as for debt maturing in 2029 through 2031.
The yields stand 69 basis points higher than MMD at the five-year mark, and 115 basis points higher than MMD at the 20-year mark.
Also, Citi priced $404.5 million of Salt River Project Agricultural Improvement and Power District, Ariz., electric system refunding revenue bonds. The bonds are rated Aa1 by Moody’s and AA by Standard & Poor’s.
Yields range from 0.42% with a 2.00% coupon in a split maturity in 2013 to 3.69% with a 5.00% coupon in a split maturity in 2030. There are no more orders for debt maturing in various split maturities in 2013 through 2018, 2020, 2022, and 2030.
In the competitive market, JPMorgan won $170 million of Florida Department of Environmental Protection, Florida Forever revenue refunding bonds. The bonds are rated A1 by Moody’s, AA-minus by Standard & Poor’s and A by Fitch.
Yields range from 0.65% with a 4.00% coupon in 2013 to 3.10% with a 5.00% coupon in 2022. Credits maturing in 2017 were not formally reoffered.
On most of the competitive sales the Florida trader has bid, there hasn’t been much in the way of pre-sale. “They’re buying after the fact,” he said. “It supports the wait-and-see approach a lot of the accounts are taking.”
