NEW YORK – The California municipal market was firmer Wednesday amid light to moderate secondary trading activity.
The Municipal Market Data triple-A 10-year scale fell four basis points Wednesday to 3.24%, the 20-year dropped five basis points to 4.47%, and the scale for 30-year bonds declined four basis points to 4.82%.
In the daily MMD commentary, Randy Smolik wrote that “dealers noted how light this coming week's primary calendar will be, causing bidders to step up on customer sell lists.”
“Intermediates saw the strongest support,” he wrote. “New money bonds issued in 2009 and 2010 still carried a special mystique. The light primary supply forced most customers to hold positions even though ratios to taxables continued to drop. The sellers that had surfaced today saw impressive bids, underscoring gains in the intermediate and dollar-bond sectors similar to the four to five basis point bumps in the MMD AAA curve yesterday, less for maturities 2018 and shorter.”
Wednesday’s triple-A muni scale in 10 years was at 89.5% of comparable Treasuries and 30-year munis were at 103.2% according to MMD. Meanwhile, 30-year tax-exempt triple-A general obligation bonds were at 108.8% of the comparable London Interbank Offered Rate.
Treasuries showed losses Wednesday. The benchmark 10-year note was quoted recently at 3.62% after opening at 3.61%. The 30-year bond was quoted recently at 4.68% after opening at 4.66%. The two-year note was quoted recently at 0.84% after also opening at 0.82%.
In economic data released Wednesday, new housing starts jumped 14.6% to a seasonally adjusted 596,000 in January, the highest level in five months, as building permits dropped following a spike in December permits as a result of code changes in four states.
Building permits fell 10.4% to a seasonally adjusted 562,000. Permits surged to 627,000 in December, revised lower from 635,000 permits reported last month. Three states, New York, Pennsylvania and California, changed building code laws effective Jan 1, 2011, that caused builders to rush into permits in December.
As a result, permits ebbed in January. Still, the January permits figure was the largest since August, excluding the December aberration.
Economists expected 540,000 housing starts and 570,000 building permits, according to the median estimate from Thomson Reuters. December housing starts were revised lower to 520,000 from 529,000.
Producer prices rose 0.8% in January, led by a 1.8% increase in prices for finished energy goods, while core prices that exclude food and energy goods rose 0.5%, the third consecutive gain.
Economists were on target, expecting producer prices to rise 0.8%, but fell far short on the gain in core prices, projecting an increase of only 0.2%, according to the median estimate from Thomson Reuters.
Industrial production slipped 0.1% in January as utilities’ output declined with the return of more seasonable weather.
December industrial production was revised higher to a 1.2% increase from a 0.8% gain reported last month.
Capacity utilization dipped to 76.1% from an upwardly revised 76.2% in December, originally reported as 76.0%.
Economists polled by Thomson Reuters expected a 0.5% increase in industrial production and a 76.4% capacity utilization level, according to the median estimate.
Previous Session's Activity
The most actively traded security in the state yesterday was San Diego County Water Authority 5s of 2032, which traded 41 times at a high of 98.452 and a low of 94.399.
