NEW YORK – The California municipal market was unchanged to slightly firmer today, as JPMorgan continued retail pricing on the mammoth $8.8 billion California revenue anticipation note sale.
Traders said tax-exempt yields were flat to lower by two or three basis points.
“We’re doing a bit better,” a trader in Los Angeles said. “We’re better two or three basis points, pretty consistently across the scale. There is decent activity out there, but not a ton of movement. Just a few basis points here and there.”
JPMorgan is expected to price for institutions California's $8.8 billion RAN deal after a second day of retail sales today. The deal, which is the single-largest note deal so far this year, consists of $3.5 billion Series A1 notes, which mature May 25, 2010, which are priced to yield 1.25% with a 3% coupon, and $5.3 billion Series A2 notes, which mature on June 23, 2010, priced to yield 1.50% with a 3% coupon. The state will use a portion of the proceeds to repay JPMorgan, which lent California $1.5 billion in August to allow the state to begin redeeming the IOUs.
Tom Dresslar, spokesman for state Treasurer Bill Lockyer, said late yesterday that “no decisions have been made yet, but we’re exploring the possibility of shutting off the June maturity at $6 billion.”
If that’s the case, Dresslar said, and the $6 billion threshold is reached, the Treasurer hopes investors will gravitate to the May maturity.
While the RAN deal garnered the top short-term ratings of MIG-1 from Moody's Investors Service and SP-1 from Standard & Poor's, Fitch Ratings last week issued its F2 rating, two notches below its top rating of F1-plus.
The Treasury market was showed some gains today. The yield on the benchmark 10-year Treasury note, which opened at 3.48%, was quoted recently at 3.45%. The yield on the two-year note was quoted recently at 0.97%, after opening at 0.98%. And the yield on the 30-year bond, which opened at 4.23%, was quoted recently at 4.20%.
Also, yesterday, the Municipal Market Data triple-A scale yielded 2.65% in 10 years and 3.61% in 20 years, extending their record lows, following yields of 2.69% and 3.64% yesterday, respectively.
As of yesterday’s close, the triple-A muni scale in 10 years was at 77.3% of comparable Treasuries, according to MMD. Additionally, 30-year munis were 95.8% of comparable Treasuries. Also, as of yesterday’s close, 30-year tax-exempt triple-A rated general obligation bonds were at 98.1% of the comparable London Interbank Offered Rate.
The economic calendar was light today.
Previous Session’s Activity
The Municipal Securities Rulemaking Board reported insured Allan Hancock Joint Community College District 4.375s of 2031 as yesterday’s most active. The bonds traded 42 times at a high of 98.059 and a low of 97.059.
