NEW YORK – The California municipal market was unchanged to slightly weaker Monday.
“We could be down a basis point, maybe two out long, but inside of 25 or so years, we’re just flat,” a trader in Los Angeles said. “The tone is a bit sleepy. I think there is a good amount of people just hanging back, sitting on the sidelines waiting for the supply that is coming this week.”
Municipal Market Data's triple-A scale yielded 2.39% in 10 years Monday, matching Friday, while the 20-year scale also remained flat at 3.37%. The scale for 30-year debt increased two basis points to 3.77%, up from 3.75% Friday.
Yields hit a generational low in the late summer at the crest of a powerful rally, with the benchmark triple-A 10-year muni yield bottoming at 2.17% on Aug. 25. Yields then backed off about 20 basis points in early September, and have all but stalled since then. The 10-year yield's increased a total of three basis points throughout last week before holding flat Monday.
Monday’s triple-A muni scale in 10 years was at 93.7% of comparable Treasuries and 30-year munis were at 96.4%, according to MMD, while 30-year tax-exempt triple-A general obligation bonds were at 106.5% of the comparable London Interbank Offered Rate.
The Treasury market was somewhat mixed Monday. The benchmark 10-year note was quoted recently at 2.56% after opening at 2.55%. The 30-year bond was quoted recently at 3.91% after opening at 3.93%. The two-year note was quoted recently at 0.37% after opening at 0.35%.
As investors continue to struggle with low absolute yields, issuers in the Northeast and California will dominate most of the primary market with relatively large financings - led by $800 million from the Bay Area Toll Authority - as part of an estimated $10.6 billion of new, long-term volume, according to Ipreo LLC and The Bond Buyer.
In the long-term market, the Bay Area Toll Authority deal will arrive as two separate series of subordinate toll bridge revenue bonds when co-senior managers Bank of America Merrill Lynch and Citi price the offering on Thursday, following a retail order period on Wednesday.
The deal will be comprised of $400 million of taxable BABs maturing in 2030, 2040, and 2050, and $400 million of tax-exempt debt maturing from 2020 to 2030 with term bonds in 2040 and 2050. Both series are expected to be rated A1 by Moody's and A-plus by Standard & Poor's.
A total of $400 million will be structured as taxable bonds, while $200 million will be new-money debt and another $100 million will consist of refunding bonds.
In economic data released Monday, existing home sales jumped 10.0% to a seasonally adjusted annual rate of 4.53 million in September, the National Association of Realtors reported Monday, while warning against a moratorium on foreclosure sales.
Sales in August totaled 4.21 million, revised up from the 4.13 million reported last month. There were 3.84 million existing home sales in July, the lowest on record dating back to 1999.
Economists expected 4.300 million existing home sales in September, according to the median estimate from Thomson Reuters. Monthly sales of previously owned homes have averaged a seasonally adjusted annual rate of 5.84 million since Jan. 1, 2001.
Previous Session's Activity
The most actively traded security in the state yesterday was taxable Sonoma County 6s of 2029, which traded 60 times at a high of 102.000 and a low of 98.900.
