NEW YORK – Traders in the tax-exempt market were sifting through several retail order periods Monday as the primary market took center stage.
“It’s been pretty quiet,” a trader located in the Southwest said. “People are trying to adjust to new levels. Retail looks like they aren’t involved too much at this point.”
The trader added that some deals in the primary market are coming in cheaper than in past issues. “On a $12 billion calendar, everyone is expecting the same this week. It will be tough sledding. There are open syndicates that people are going to have to deal with and have all partners take their share and say ‘wish you well’. We are going to see significant adjustments to get through this week.”
He added munis are not following Treasuries and are taking direction from supply and demand factors this week.
Munis were steady Monday afternoon, according to the Municipal Market Data scale. On Friday, the 10-year yield closed flat at 1.90% while the 30-year yield fell one basis point to 3.18%. The two-year was steady at 0.32% for the sixth consecutive trading session.
Treasuries were stronger than Friday’s levels. The benchmark 10-year yield dropped three basis points to 1.61% while the 30-year yield fell four basis points to 2.73%. The two-year was steady at 0.28%.
In the negotiated market Monday, the Michigan Finance Authority priced for retail $2.69 billion of unemployment obligatory assessment revenue bonds in two series. The bonds in both are rated triple-A by the major rating agencies.
Citi priced the first series of $1.46 billion for retail, with an institutional order period Tuesday.
Yields ranged from 0.40% with 2%, 3%, and 5% coupons in a split 2014 maturity to 1.63% with 3%, 4%, and 5% coupons in a split 2019 maturity. Credits maturing in 2013 were offered via sealed bid. Portions of bonds maturing between 2013 and 2019 were not offered for retail.
Bank of America Merrill Lynch priced the second series of $1.23 billion for retail, to be followed by an institutional order period Wednesday. The bonds yielded 1.92% with a 5% coupon in 2020, 2.09% with a 5% coupon in 2021, 2.07% with a 5% coupon in 2022, and 1.77% with a 5% coupon in 2023. Portions of bonds maturities between 2020 and 2023 were not offered for retail.
Credits maturing in 2020 are callable at par in 2019, bonds maturing in 2021 are callable at par in 2018 and 2019, credits maturing in 2022 are callable at par in 2016 and 2018, and bonds maturing in 2023 are callable at par in 2014 and 2016.
Wells Fargo Securities priced for retail $519.9 million of Connecticut general obligation bonds, rated Aa3 by Moody’s Investors Service and AA by Standard & Poor’s, Fitch Ratings, and Kroll Bond Ratings.
Yields ranged from 0.25% with a 3% coupon in 2013 to 2.67% with 2.5% and 5% coupons in a split 2025 maturity. The bonds are callable at par in 2022.
Morgan Keegan held preliminary pricing for $129.1 million of Socorro, Texas, Independent School District unlimited tax school building bonds, rated AAA with insurance from the Permanent School Fund Guarantee Program.
Yields ranged from 2.25% with a 5% coupon in 2022 to 3.43% with a 5% coupon in 2037. The bonds are callable at par in 2021.
The trader in the Southwest noted this deal came in cheaper than past deals. “I’m hearing it’s kind of spotty in serial ranges. It is 12 basis points cheaper than the last deal that came. And that’s kind of the trend in the market right now.”
In the secondary market, trades reported by the Municipal Securities Rulemaking Board showed strengthening over the past few trading sessions.
A dealer sold to a customer Connecticut Health and Educational Facilities Authority 4.25s of 2031 at 4.25%, 20 basis points lower than where they traded Friday.
Bonds from an interdealer trade of Massachusetts Educational Financing Authority 4.7s of 2027 yielded 4.34%, 11 basis points lower than where they traded Thursday.
A dealer bought from a customer Louisville, Ky., Regional Airport Authority 4s of 2013 at 0.77%, seven basis points lower than where they traded Thursday.
Bonds from an interdealer trade of Illinois Metropolitan Pier and Exposition Authority zeros of 2051 yielded 5.68%, five basis points lower than where they traded Friday.
