NEW YORK – The tax-exempt market ended the week on a strong note as last minute shoppers made final purchases, pushing the 10-year yield to a new low.
The new record didn’t get much reaction from the markets. “There was little or no follow through after Municipal Market Data announced a historical low on the 10 year spot,” said a trader in New York. “That could be do to half the street being gone for the weekend.”
He added there were buyers in the morning, “but by mid-day liquidity started to really dry up.”
And while most traders on Friday went home to begin vacation early, it was the deals earlier in the week that started the buying spree. A trader in Atlanta called New York’s $700 million Empire State Development Corp. deal one of the “most interesting deals” and the $145.6 million North Carolina Garvee deal priced by Bank of America Merrill Lynch was three times oversubscribed.
The big standout was most likely District of Columbia’s $400 million income tax secured revenue deal priced by Wells Fargo. After 100% of the $200 million negotiated deal was sold Tuesday to retail, D.C. decided to price the additional $200 million through a negotiated offering instead of the original scheduled competitive transaction. A trader in New Jersey said yields were lowered as much as seven basis points.
And buyers scrambling for bonds buoyed munis on Friday and throughout the week. On Friday, the six- to 14-year yield fell one basis point while the 15- to 18-year maturity fell two basis points. Yields beyond the 19-year maturity fell one basis point.
Over the week, munis yields finished down. The 10-year yield dropped four basis points over the week to close at 1.93% on Friday, pushing the yield down to a level not previously recorded. Before this week, the last time the 10-year neared this level was September when the Federal Reserve announced its “Operation Twist” and pushed the 10-year yield down to 1.97%.
The 30-year muni yield dove seven basis points over the week to close at 3.62% on Friday. The two-year yield held steady at 0.36%.
Treasuries rallied even more. The benchmark 10-year yield dove 18 basis points throughout the week, closing at 1.85% on Friday. The 30-year yield plummeted 20 basis points since Monday to close at 2.86% on Friday. The two-year yield held stead at 0.24%.
In the secondary market, trades recorded by the Municipal Securities Rulemaking Board showed firming throughout the week.
A dealer bought from a customer New York Liberty Development Corp. 5s of 2041 at 4.28%, 12 basis points lower than where they traded Tuesday.
Bonds from an interdealer trade of Humble, Texas, Independent School District 5s of 2025 yielded 2.00%, eleven basis points lower than where they traded Wednesday.
A dealer sold to a customer Oklahoma Transportation Authority 5s of 2027 at 3.25%, eight basis points lower than where they traded Monday.
Bonds from an interdealer trade of Washington 5s of 2041 yielded 4.05%, seven basis points lower than where they traded Tuesday.
Looking forward to next week, the schedule should be more robust than a typical week before Christmas. Suffolk County, N.Y., delayed a $400 million deal expected to come this week to next Tuesday.
Currently on the calendar for next week is $905.2 million of new issuance, including $365.5 million in negotiated deals and $539.8 million in competitive sales.
