NEW YORK – The California municipal market was again firmer Wednesday as interest in the primary market helped buoy the secondary and drop 30-year yields back below 5%.
The rally of the past two sessions comes on the heels of last week’s sell-off, which brought 30-year yields to a two-year high.
“We’re better probably four or five basis points on the whole,” a trader in Los Angeles said. “There was decent activity in the secondary.”
The Municipal Market Data triple-A 10-year scale fell four basis points Wednesday to 3.42%, the 20-year scale dropped six basis points to 4.79%, and the scale for 30-year bonds declined four basis points to 4.98%, dipping back under 5% for the first time since crossing the threshhold last Thursday.
In the daily MMD commentary, Randy Smolik wrote that the primary market “provided leadership and relief to secondary.”
“There was a renewed vigor to own bonds,” he wrote.
Wednesday’s triple-A muni scale in 10 years was at 102.4% of comparable Treasuries and 30-year munis were at 109.9%, according to MMD. Meanwhile, 30-year tax-exempt triple-A general obligation bonds were at 117.5% of the comparable London Interbank Offered Rate.
Treasuries showed some gains Wednesday. The benchmark 10-year note was quoted recently at 3.34% after opening at 3.36%. The 30-year bond was quoted recently at 4.53% after opening at 4.56%. The two-year note was quoted recently at 0.58% after opening at 0.59%.
In the California new-issue market Wednesday, Goldman, Sachs & Co. priced $197.7 million of taxable and tax-exempt transmission project revenue bonds for the Southern California Public Power Authority in two series.
Bonds from the $170.4 million tax-exempt series mature from 2012 through 2019, with yields ranging from 1.00% with a 5% coupon in 2012 to 3.80% with a 5% coupon in 2019. These bonds are not callable.
Bonds from the $27.3 million taxable series mature in 2011 and 2012, yielding 1.25% priced at par in 2012. Bonds maturing in 2011 were not formally re-offered. These bonds are not callable.
The credit is rated AA-minus by Standard & Poor’s and Fitch.
In economic data released Wednesday, December housing starts dropped 4.3% to an annualized rate of 529,000 even as building permits headed the other way, jumping 16.7% to 635,000.
Federal officials indicated that the surge in building permits may be related to changes to state building codes for new residential construction effective in January 2011 in California, Pennsylvania and New York.
Economists expected 550,000 starts and 560,000 building permits in December. November building permits were revised higher to 544,000 from 530,000, and housing starts were revised to 553,000 from 555,000.
Previous Session's Activity
The most actively traded security in the state yesterday was California 5s of 2037, which traded 99 times at a high of 87.396 and a low of 81.440.
