The municipal market's sell-off is negatively impacting primary deals pricing on Tuesday, market participants said.
A trader in Chicago said this effect can be seen in how yields on $305.87 million Delaware general obligation bonds were raised during their institutional pricing on Tuesday from their retail pricing on Monday. Yields were increased from three to 20 basis points on the bonds.
Market participants said yields were raised on the Delaware bonds in response to the municipal market's selling off for the second straight day.
"You can see price adjustments with the Delaware deal, they adjusted yields to follow the [Municipal Market Data]," a trader in New York said.
Yields on bonds maturing in four years rose by as much as two basis points, yields rose from one to three basis points for bonds maturing in five years, and from three to five points for six- to 10-year maturities.
Yields for bonds maturing from 11 to 16 years rose from five to seven basis points, by four to six basis points for bonds maturing in 17 to 26 years, and by three to five basis points for bonds maturing in 27 to 30 years.
Traders said municipal bonds are weakening because they are following Treasuries' weakness earlier on Tuesday morning.
Positive news out of Europe caused Treasuries to weaken on Tuesday morning. The European Central Bank announced it is considering pushing money back into Europe's economy by buying corporate bonds. At this time there is no certainty about the plan, or even a preliminary timetable, but European stocks rallied and Treasuries fell after the announcement. Market participants had cited Eurozone weakness as the key driver behind the Treasury rally last week.
On Tuesday morning Treasuries also weakened slightly from Monday's close with the two-year note yield rising by one basis point to 0.38%. The 10-year yield increased two basis points to 2.22%, and the 30-year grew three basis points to 2.99%.
Treasuries have since strengthened with the two-year note dropping to 0.36%, the 10-year to 2.20%, and the 30-year to 2.97%.
The trader in New York called the market "volatile."
Yields on the Delaware bonds for institutions ranged from 0.30% with a 2% coupon in 2016 to 3.07% with a 3.50% coupon in 2034. There is a sealed bid on the 2015 maturity, and the bonds can be called at par in 2024.
The bonds earned triple-A ratings from the three major rating agencies.
Primary
Maryland Health and Higher Education Facilities Authority sold $242.1 million revenue bonds for Western Maryland Health System. The bonds are rated BBB by Standard & Poor's and carried yields of 0.57% with a 4% coupon in 2015 to 4.02% with a 4% coupon in 2035.
They can be called at par in 2024, and have a sinking fund on a term bond in 2034. Wells Fargo Securities is the managing underwriter.
The $211.3 million Anchorage, Alaska, general obligation bonds began their retail order period Tuesday. The sale is a four-part deal with two parts, the $39.1 million GO bonds and the $36.7 million GO refunding bonds, available for retail order. Yields on the first $39.1 million part range from 0.33% with a 3% coupon in 2016 to 2.72% with a 5% coupon in 2034. There is a sealed bid on the 2015 maturity.
Yields on the $36.7 ranged from 0.59% with a 5% coupon in 2017 to 2.26% with a 5% coupon in 2026. There is also a sealed bid on the 2015 maturing in this section.
The other two parts are $77.5 million GO refunding bonds with maturities from 2015 to 2025, and $58.1 million GO bonds with maturities starting at 2015 to 2034. There is a sealed bid on these sections for 2015.
All four parts of the deal can be called at par in 2024, and all the bonds are rated AAA by S&P and AA-plus by Fitch Ratings. JP Morgan is the managing underwriter.
The $208.5 million Fairfax County, Va., bonds were auctioned and priced to yield from 0.15% with a 1.50% coupon in 2015 to 2.27% with a 3% coupon in 2026. Citigroup won the bid for the bonds, and they have an optional call in 2024 and are rated triple-A by the three major rating agencies.
The $177.1 million Washington Health Care Facilities Authority revenue bonds were priced by Bank of America Merrill Lynch. The sale has only two maturities with a yield of 3.36% with a 5% coupon in 2037, and 3.48% with a 5% coupon in 2041.
There are sinking funds on term bonds in 2037 and 2041. The bonds can be called at par in 2024, and are rated Aa3 by Moody's Investors Service, AA-minus by S&P and AA by Fitch.
