Hiking day: Fed raises rates, east coasters deal with Nor'Easter

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Primary and secondary activities were an afterthought Wednesday as the municipal market focused on the interest rate announcement from the Federal Reserve Board.

There were no surprises from the Federal Open Market Committee: it raised the federal funds rate target to a 1.50% to 1.75% range, as expected, while the Summary of Economic Projections still calls for three hikes this year. In a statement, the panel said, “The stance of monetary policy remains accommodative, thereby supporting strong labor market conditions and a sustained return to 2 percent inflation.”

Policymakers remain split, with seven officials expecting at least four 25 basis point increases in 2018, and eight seeing three or fewer as appropriate. The projections for next year were raised from two increases to three.

A lackluster mood fell over the market ahead of the 2 p.m. announcement and could be felt in the trading activity, according to Dallas trader Peter Stare, managing director at Hilltop Securities Inc., who blamed the sluggishness on a Nor’Easter, overall low volume, and the Fed’s decision.

Investors were “standing pat” ahead of the Fed announcement, he said.

“The calendar is so light and there are more bid wanted lists around than people looking to add stuff and that makes for a quiet and uneventful trading session,” Stare said.

“The market is extremely quiet, and it’s probably slightly weaker,” he said. “With the storm in New York moving its way up the coast, people are working from home and leaving early.”

Primary Market
The muni primary action was light on Wednesday, as it typically is on days when the FOMC meets.

In the most notable deal on the schedule, Ramirez priced the Los Angeles Department of Airports’ $226.45 million of senior refunding revenue bonds subject to alternative minimum tax. The deal is rated Aa3 by Moody’s Investors Service and AA by S&P Global Ratings and Fitch Ratings.

The deal got done according to one New York trader, as the yields on the deal ended up being bumped by just a few basis points on most maturities.

"The demand for the deal was not terrible, but I think it is fair to say that if anything, it was impacted more by FOMC than the weather here on the east coast," he said.

The last issuance of the week is expected to roll in on Thursday, including the largest deal of the week.

Bank of America Merrill Lynch is slated to price the School District of Philadelphia's $251 million of general obligation bonds. The deal will be backed by the Pennsylvania State Aid Intercept Program and is rated Aa2 by Moody's and A-plus by Fitch.

Morgan Stanley is scheduled to priced Rutgers University's $150 million bonds, with $100 million being of the taxable variety.

Wednesday’s bond sale
Department of Airports for the City of Los Angeles:
Click here for the $226.45M preliminary pricing

Click here for the $226.45M final pricing

Data appearing in this article from Municipal Bond Information Services, including the MBIS municipal bond index, is available on The Bond Buyer Data Workstation. Click here for a brief tour of the Workstation, or contact Vanessa Kim at 212-803-8474 for more information.

-Gary E. Siegel contributed to this report.

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Primary bond market Secondary bond market Interest rates Los Angeles Department of Airports FOMC