NEW YORK — Heavy municipal bond issuance has given the market pause so far Wednesday.
Yields on many of the largest deals are seeing concessions. On some of the smaller deals, though, investors are grabbing paper at yields that better fit their price parameters.
“You’re seeing a lot of new-issue activity,” said a trader in Texas. “There’s a [$141 million New Jersey Turnpike, led by JPMorgan] out there that’s having a really good showing, a lot of interest; it’s way oversubscribed.”
The volume has swelled over the past two days, the trader added, as the week nears its end.
“The talk is we’re trying to get as many deals out today and finish them tomorrow and then pretty much shut down for the week,” he said. “And I would expect next week to be pretty light.”
Given that, yields should fall somewhat on the day, he added, despite all the volume. “There’s so much demand,” he said. “The premiere deals are driving it. And in the end it’s going to push interest rates down just a bit.”
Tax-exempt yields are steady across most of the curve crossing noon, according to the Municipal Market Data scale. The benchmark 10-year triple-A yield and the 30-year yield each closed Tuesday five basis points higher, at 1.83% and 3.14%, respectively.
The two-year yield rose two basis points to 0.33%, after 24 straight trading sessions at 0.31%.
Treasury yields continue to fall heading into Wednesday afternoon. The benchmark 10-year Treasury yield has plunged six basis points to 1.72%.
The 30-year yield, which jumped six basis points on Tuesday, has fallen back eight basis points so far to 2.79%. The two-year yield has inched down one basis point to 0.30%.
An early close is recommended Friday ahead of the Memorial Day holiday, so traders likely regard this week as a shortened one. The industry still anticipates a solid uptick in primary issuance. Muni volume estimates hold that $9.19 billion will reach the market, compared with $6.83 billion that turned up last week.
On the negotiated side of the ledger Wednesday, Barclays Capital priced $399.6 million of San Diego County Regional Transportation Commission limited tax sales tax revenue bonds. The bonds are rated Aa2 by Moody’s Investors Service and AAA by Standard & Poor’s.
Yields range from 0.30% with 2.00% and 3.00% coupons in a split maturity in 2014 to 4.125% at par and 3.72% with a 5.00% coupon in a split maturity in 2048.
Credits maturing in 2013 were offered in a sealed bid. The bonds are callable at par in 2022.
In the competitive market, Bank of America Merrill Lynch won $280 million of Ohio school general obligation bonds. The bonds were rated Aa1 by Moody’s and AA-plus by Standard & Poor’s and Fitch Ratings.
Yields range from 2.18% with a 5.00% coupon in 2022 to 3.36% with a 4.00% coupon in 2030. Credits maturing in 2013 through 2021, as well as in 2031 and 2032 were sold but not available. The bonds are callable at par in 2021.
Alongside the Treasury market rally, the stock market has been having a rough day. Indexes are all down at least 1.00%. The Dow Jones Industrial Average has fallen about 141 points from Tuesday’s close.
