The streak is over.
After nine straight record-setting sessions, 10-year municipals did not set a new low Monday. They came close, though, holding at the existing record amid fairly light secondary trading.
“There was still a definite firmer tone, but like Friday, the secondary was quiet,” a trader in Los Angeles said. “There wasn’t a whole lot trading, but business that needed to get done got done. Overall though, it was pretty quiet and pretty flat.”
The Municipal Market Data triple-A scale yielded 2.29% in 10 years and 3.39% in 20 years Monday, matching Friday’s record-low levels. The scale yielded 3.75% in 30 years Friday, matching an all-time low on Thursday.
Monday’s unchanged levels break streaks of nine straight historical lows for 10-year munis, and two consecutive all-time lows for 20- and 30-year tax-exempts.
Monday’s triple-A muni scale in 10 years was at 88.4% of comparable Treasuries and 30-year munis were at 102.7%, according to MMD, while 30-year tax-exempt triple-A general obligation bonds were at 114.0% of the comparable London Interbank Offered Rate.
The Treasury market was mostly flat Monday. The benchmark 10-year note was quoted recently at 2.60% after opening at 2.61%.
The 30-year bond was quoted recently at 3.66% after opening at 3.66%. The two-year note was quoted recently at 0.49% after opening at 0.49%.
While the seasonal note calendar is in full swing, the dog days of summer are plaguing issuance in the long-term bond market.
Amid the largest budget shortfall in Texas history, a $7.8 billion issuance of tax and revenue anticipation notes from the state will dominate the short-term market, while longer-term supply is expected to be fairly skimpy this week.
Volume in the primary market is estimated at $4.77 billion, according to Ipreo LLC and The Bond Buyer. That follows a revised $5.65 billion that was priced last week, according to Thomson Reuters.
On behalf of the state, the Texas Public Finance Authority will stride into the competitive market Tuesday. Bids will be received by the comptroller through a website operated by Grant Street Group at www.trantexas.com. It is the largest Tran issue in Texas since a $7.4 billion offering in 2003. The coupon has been set at 2%.
The Trans, which have the highest short-term ratings from all three major rating agencies, are being issued to avoid a temporary cash shortfall in the unrestricted accounts in the state’s general revenue fund during fiscal 2011, which begins Sept. 1, according to the preliminary official statement.
Texas officials currently project that the maximum temporary cash shortfall in fiscal 2011 will be $10.8 billion before application of the note proceeds and other available interfund and intrafund borrowing.
The state expects to begin fiscal 2011 with a $2.2 billion negative cash balance in the general fund’s unrestricted accounts. It is expected to end fiscal 2011 with a negative cash balance of $4.5 billion after payment of the Series 2010 notes.
Rated MIG-1 by Moody’s Investors Service, SP-1-plus by Standard & Poor’s, and F1-plus by Fitch Ratings, the notes are secured by a lien on all amounts held in the proceeds account, the payment account, and the sinking account of the note fund.
In the long-term market, a $533 million revenue sale from the Southern California Public Power Authority will be priced by JPMorgan on Wednesday following a retail order period Tuesday. The bonds are being issued on behalf of the Windy Point/Windy Flats power project.
They mature from 2011 to 2030 and have AA-minus ratings from Standard & Poor’s and Fitch.
Back in Texas, a $229 million sale of combined utility revenue bonds is on tap from Houston.
RBC Capital Markets plans a Tuesday pricing with serials from 2011 to 2019 that are rated Aa2 by Moody’s, AA by Standard & Poor’s, and AA-minus by Fitch.
In the new-issue market Monday, Wells Fargo Securities priced $243.2 million of solid-waste disposal revenue and refunding bonds for the North Carolina Capital Facilities Finance Agency in three series.
Bonds from the $71.6 million revenue Series 2006A mature in 2031, yielding 4.375% priced at par. The bonds are callable at par in 2020.
Bonds from the $71.6 million revenue Series 2006B mature in 2031, yielding 4.375% priced at par. The bonds are callable at par in 2020.
Bonds from the $50.0 million revenue refunding Series 2008A mature in 2040, yielding 4.625% priced at par. The bonds are callable at par in 2020.
Bonds from the $50.0 million revenue refunding Series 2008B mature in 2040, yielding 4.625% priced at par. The bonds are callable at par in 2020.
The credit is rated A1 by Moody’s and A by Standard & Poor’s.
Morgan Stanley priced $64.0 million of revenue bonds for the Louisiana Local Government Environmental Facilities and Community Development Authority.
The bonds mature from 2020 through 2025, with yields ranging from 3.14% with a 3.375% coupon in 2020 to 3.98% with a 3.75% coupon in 2025.
The bonds, which are callable at par in 2020, are rated A1 by Moody’s and A-plus by Standard & Poor’s.
First Southwest Co. priced $52.0 million of unlimited-tax school building bonds for Texas’ Donna Independent School District.
The bonds mature from 2011 through 2030, with term bonds in 2035 and 2040. Yields range from 0.48% with a 2% coupon in 2012 to 4.18% with a 4% coupon in 2040.
The bonds, which are callable at par in 2020, are backed by Texas’ Permanent School Fund. The underlying credit is rated A2 by Moody’s and A by Standard & Poor’s.
The economic calendar was light Monday.