NEW YORK – The California municipal market was firmer by as much as eight to 10 basis points in the belly of the curve Tuesday and two or three basis points elsewhere in the curve as Morgan Stanley & Co. accelerated pricing on an upsized $750 million on behalf of California’s Sutter Health.
“The belly of the curve is showing pretty substantial gains,” a trader in San Francisco said. “I’m really not seeing that anywhere else, to that degree anyway, but it’s firmer all through the curve. Maybe two or three basis points better on the long end, but in that belly, it’s six to eight, maybe a little more.”
In new-issue activity Tuesday, Morgan Stanley priced a total of $750 million of hospital revenue bonds from two conduit issuers on behalf of Sutter Health.
The deal was scheduled for retail pricing Tuesday and institutional pricing Wednesday, but pricing was accelerated amid Tuesday’s gains. The total size of the deal was also increased by $175 million from the originally planned $575 million.
Yields on the $475 million California Health Facilities Finance Authority series ranged from 3.45% with a 5% coupon in 2016 to 6.25% with a 6% coupon in 2042. The bonds are callable at par in 2020.
Yields on the $275 million California Statewide Communities Development Authority series ranged from 3.45% with a 5% coupon in 2016 to 6.20% with a 6% coupon in 2042. The bonds are callable at par in 2020.
The credit is rated Aa3 by Moody's Investors Service and AA-minus by both Standard & Poor's and Fitch Ratings.
The Municipal Market Data triple-A 10-year scale dipped five basis points Tuesday to 3.37%, the 20-year scale declined nine basis points to 4.62%, and the scale for 30-year bonds fell three basis points to 4.83%.
Tuesday’s triple-A muni scale in 10 years was at 100.3% of comparable Treasuries and 30-year munis were at 107.1%, according to MMD. Meanwhile, 30-year tax-exempt triple-A general obligation bonds were at 113.9% of the comparable London Interbank Offered Rate.
Treasuries were firmer Tuesday. The benchmark 10-year note was quoted recently at 3.32% after opening at 3.41% at the open. The 30-year bond was quoted recently at 4.48% after opening at 4.55%. The two-year note was quoted recently at 0.57% after opening at 0.60%.
The Treasury Department auctioned $35 billion of two-year notes with a 5/8% coupon at a 0.65% yield, a price of 99.95. The bid-to-cover ratio was 3.47%. The Federal Reserve banks also bought $697.4 million for their own account in exchange for maturing securities.
In economic data released Tuesday, consumer confidence improved faster in January than economists estimated, rising to an eight-month high of 60.6. Economists forecast an increase to 54.3 from a December level of 53.3.
Consumer confidence has averaged 84.31 the past 10 years in the index, which has a base reading of 100 that reflects survey responses in 1985.
Previous Session's Activity
The most actively traded security in the state yesterday was San Marcos Redevelopment Agency 8.5s of 2030, which traded 69 times at a high of par and a low of 97.125.
