NEW YORK – The California municipal market was again weaker Wednesday amid light to moderate secondary trading ahead of Thursday’s market closure in observance of Veterans Day.
Traders said tax-exempt yields were higher by one to three basis points inside of 10 years, and increased five to seven basis points further out.
“We’ve seen continued weakness today, and it will probably carry a bit into Friday and next week,” a trader in Los Angeles said. “There’s probably not going to be much happening Friday with the holiday tomorrow; people will be treating it at something of a four-day weekend. But I wouldn’t be surprised to see yields widen a bit more.”
In the new-issue market Wednesday, Barclays Capital priced $647.6 million of tax-exempt and taxable debt for the Santa Clara Valley Transportation Authority, including $470.7 million of taxable Build America Bonds.
The BABs mature from 2021 through 2023 with a term bond in 2032. Yields range from 4.649% in 2021, or 3.02% after the 35% federal subsidy, to 5.876% in 2032, or 3.82% after the subsidy.
The bonds were priced to yield between 160 and 240 basis points over the 10- and 30-year Treasury yields.
Bonds from the $176.8 million tax-exempt series mature from 2014 through 2020, with yields ranging from 1.10% with a 4% coupon in 2014 to 2.88% with a 5% coupon in 2020. These bonds are not callable.
The credit is rated Aa2 by Moody’s Investors Service and AA-plus by Standard & Poor’s.
Municipal Market Data's triple-A scale yielded 2.62% in 10 years Wednesday, seven basis points higher than Tuesday’s 2.55%, while the 20-year scale yielded 3.73%, seven basis points more than Tuesday’s 3.66%. The scale for 30-year debt climbed seven basis points to 4.17% Wednesday from 4.10% Tuesday.
Wednesday’s triple-A muni scale in 10 years was at 98.5% of comparable Treasuries and 30-year munis were at 98.1%, according to MMD, while 30-year tax-exempt triple-A general obligation bonds were at 107.5% of the comparable London Interbank Offered Rate.
The Treasury market was mixed Wednesday. The benchmark 10-year note was quoted recently at 2.66% after opening at 2.70%. The 30-year bond was quoted recently at 4.25% after opening at 4.24%. The two-year note was quoted recently at 0.44% after also opening at 0.44%.
The Treasury Department Wednesday auctioned $16 billion of 30-year bonds with a 4 1/4% coupon at a 4.320% high yield, a price of 98.83. The bid-to-cover ratio was 2.31. The Federal Reserve banks also bought $429.0 million for their own account in exchange for maturing securities.
In economic data released Wednesday, initial jobless claims decreased 24,000 to 435,000 on a seasonally adjusted basis for the week ended Nov. 6, more than cancelling out the upwardly revised 22,000 increase reported the previous week.
Continuing claims for the week ended Oct. 30 dropped to 4.301 million, the third decline in four weeks and the lowest level since roughly the height of the financial crisis - the week of Nov. 22, 2008.
Economists polled by Thomson Reuters expected 450,000 initial claims and 4.500 million continuing claims, according to the median estimates.
Import prices jumped 0.9% in October, as both fuel and non-fuel imports rose, the Labor Department reported Wednesday morning. However, the rise was just shy of economists' expectations.
Overall export prices increased 0.8% in October, the third consecutive monthly increase, led by a 2.5% jump in agricultural export prices.
Import prices excluding fuel increased 0.3% and prices excluding petroleum increased 0.4%. It was the largest increase in import prices excluding petroleum since May.
Fuel import prices, which dropped 1.7% in September, jumped 3.0% in October, led by increased imports of crude and petroleum product prices. It was the largest increase since January's 4.4% jump in fuel imports.
But economists expected overall import prices would rise 1.2%, according to the median estimate from Thomson Reuters.
Previous Session's Activity
The most actively traded security in the state yesterday was taxable University of California BABs 6.398s of 2031, which traded 132 times at a high of par and a low of 99.602.
