New issuance in the municipal market was firmer yesterday as high-grade bonds improved by one or two basis points. That turned away some in the secondary market, where trading was light to moderate.
A trader in New York said recent firmness owed to the market branching off between tax-exempt supply issued from one year to 15 years, and taxable Build America Bonds issued 16 years and out.
“That’s cutting down on a lot of the tax-exempt supply, which we have continued demand for,” he said. “It’s not robust demand, but it’s enough to cover each base as we step up.”
Traders said buyers are waiting for new issues to hit the market, as current yields fail to match expectations.
In new issuance, demand among retail buyers remained high for the California Department of Water Resources’ $2 billion power supply refunding deal. With a few hours left in the two-day retail period, more than $1.3 billion of the issue had been sold. Institutional pricing is scheduled for today.
The DWR deal features bifurcated maturities from 2011 through 2022. Yields ranged from 0.95% in the short end to 3.81% in 2022. On Monday, yields ranged from 0.94% to 3.80%.
Book-runners Morgan Stanley, De La Rosa & Co., and JPMorgan are leading 25 selling group members on the deal, which carries ratings of Aa3 from Moody’s Investors Service and AA-minus from Standard & Poor’s and Fitch Ratings.
Treasuries Tuesday strengthened sharply across the curve. The benchmark 10-year yield closed the day at 3.60%, a full 10 basis points lower than Monday’s closing yield of 3.70% and 17 basis points stronger than the recent peak of 3.77% last Thursday. Similarly, the two-year yield closed at 0.96%, versus a closing yield of 1.01% Monday.
The 30-year Treasury, which closed Monday at 4.54%, weakened by as much as four basis points to 4.58% Tuesday morning, but in the afternoon it reversed direction and closed at 4.42%.
The Municipal Market Data triple-A scale yielded 2.96% in 10 years yesterday, unchanged from Monday but much stronger than the late March level of 3.09%.
In new issuance yesterday, Goldman, Sachs & Co. priced a $207.5 million deal for the Pennsylvania Intergovernmental Cooperation Authority. The special tax revenue refunding bonds, which will help finance Philadelphia’s funding program, were expected to carry ratings of Aa2 from Moody’s, AA from Standard & Poor’s, and AA-plus from Fitch.
The deal was structured with serial bonds maturing from 2011 to 2022. Pricing information was not available at press time.
Also, the city of Tampa, Fla., came to market with $199.5 million of health system revenue bonds. They were priced by Morgan Stanley & Co., and mature from 2010 to 2023, with yields ranging from 1.40% in 2011 to 4.50% in 2023. They are rated Aa3 by Moody’s and AA-minus by Fitch.
Meanwhile, Wells Fargo Securities priced $119.7 million of public improvement refunding GOs for Henrico County, Va. The bonds are rated triple-A by all three ratings agencies.
Maturities are offered from 2010 to 2025, with yields ranging from 0.30% on the short end to 3.42% in 2025.
Finally, the Massachusetts Housing Finance Agency began a retail period for a $250 million refunding issuance yesterday. The official pricing for is scheduled for today.
The bonds are underwritten by Bank of America Merrill Lynch and carry ratings of Aa3 by Moody’s and AA-Minus by Fitch.