NEW YORK - The California municipal market endured another session of pronounced losses Wednesday, as yields climbed 10 to 12 basis points amid continued uncertainty over the future of Build America Bonds, driving 20-year yields to 17-month highs.
"There's still a very palpable fear of the unknown out there in regards to the future of the BAB program," a trader in Los Angeles said. "There's still some optimism something could get done, but it seems like the sentiment is shifting back towards an expectation that the program will be done in about three weeks. Today, we're just picking up from yesterday and just getting routed out there."
In the new-issue market Wednesday, Goldman, Sachs & Co. priced $1.8 billion of taxable BABs for the New Jersey Turnpike Authority. The deal was upsized by $350 million from the originally planned $1.5 billion.
The bonds mature in 2041 and yield 7.102%, priced at par, or 4.62% after the 35% federal subsidy. The bonds were priced to yield 262.5 basis points over the 30-year Treasury yield.
The credit is rated A3 by Moody's Investors Service, A-plus by Standard & Poor's, and A by Fitch Ratings.
The Municipal Market Data triple-A scale yielded 3.00% in 10 years Wednesday, up 13 basis points from Tuesday's 2.87% to its highest level since 3.01% on Nov. 18, while the 20-year scale rose 12 basis points to a 4.23% yield, its highest since July 7, 2009, when it was also 4.23%. The scale for 30-year debt widened 14 basis points to 4.62%, matching its highest mark since Nov. 17.
Wednesday's triple-A muni scale in 10 years was at 92.6% of comparable Treasuries and 30-year munis were at 103.8%, according to MMD. Meanwhile, 30-year tax-exempt triple-A general obligation bonds were at 111.6% of the comparable London Interbank Offered Rate.
The Treasury market was weaker Wednesday. The benchmark 10-year note was quoted recently at 3.23% after opening at 3.12%. The 30-year bond was quoted recently at 4.43%, after opening at 4.37%. The two-year note was quoted recently at 0.61% after opening at 0.53%.
Amid the muni sell-off, the San Francisco Public Utilities Commission postponed until next week its competitive pricing of $173.5 million of tax-exempt bonds and $350 million of BABs Wednesday due to market conditions.
The economic calendar was light Wednesday.
Previous Session's Activity
The most actively traded security in the state yesterday was taxable University of California BABs 1.988s of 2050, which traded 124 times at a high of 100.050 and a low of 99.625.
