Market Post: Secondary Eyes Long-End

NEW YORK – As primary deals come to market, the secondary is focused on the long-end of the curve with traders rebalancing portfolios ahead of the New Year.

“We are getting spurts of sporadic buying,” said a trader in New York. “Dealers aren’t stocking a whole lot ahead of 10-years” as the end of the year approaches. He added, if buyers are purchasing bonds inside the 10-year, most of the bonds are pre-refunded.

Munis were flat across the curve, according to the Municipal Market Data scale.

On Monday, the two-year muni yield closed flat at 0.36% for its fourth consecutive trading session. The 10- and 30-year muni yield closed flat for the third consecutive trading session at 1.97% and 3.69%, respectively.

Treasuries were weakening in Tuesday early afternoon trading. The two-year yield was up one basis point from Monday to 0.24%. The benchmark 10-year yield increased two basis points from Monday’s session to 2.05%, regaining a small loss from morning trading when it yielded 2.06%. The 30-year yield increased three basis points to 3.09%.

In the primary market, the competitive calendar took the lead with New York’s Empire State Development Corp. bringing two pricings worth $700.3 million total. Bank of America Merrill Lynch won the bid for both issues. The deals are rated AAA by Standard & Poor’s and AA by Fitch Ratings.

Yields on the first series, $542.9 million of state personal income tax revenue bonds, ranged from 1.01% with a 5% coupon in 2016 to 3.80% with a 4% coupon in 2032. Credits maturing between 2012 and 2015, 2025, 2033 to 2036, and 2041 were sold but not available. The debt is callable at par in 2021.

Yields on the second series, $157.4 million of federally taxable state personal income tax revenue bonds, ranged from 0.25% priced at par in 2012 to 2.79% priced at par in 2021. Credits maturing in 2014 were sold but not available.

In the negotiated market, Wells Fargo priced for retail $200 million of District of Columbia income tax secured revenue bonds. The credit is rated Aa1 by Moody’s Investors Service, AAA by Standard & Poor’s and AA-plus by Fitch.

Yields ranged from 0.30% with a 2% coupon in 2012 to 4% priced at par and 3.98% with a 5% coupon in a 2036 split maturity. The debt is callable at par in 2021.

Barclays Capital priced $155 million of Massachusetts State College Building Authority project revenue bonds. The credit is rated Aa2 by Moody’s and AA by Standard & Poor’s.

Yields ranged from 0.51% with a 3% coupon in 2013 to 4.15% with a 5% coupon in 2041. The debt is callable at par in 2022.

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