California priced for retail the largest deal of the week Tuesday amid a more constructive tone in the overall market.

While munis ended softer for the second session this week, traders said California saw fairly good retail demand on its $2.16 billion of tax-exempt bonds. The state also took indications of interest on its $600 million of taxable debt.

“We are putting in orders for retail and getting good response,” a Los Angeles trader said. “And so far so good. Yields have gone up recently so the deal looks more attractive to retail. But there are a lot of bonds to sell.”

“California could give the market direction one way or another,” a second Los Angeles trader said. “We are cautious going into it but hopefully will come out stronger.”

JPMorgan priced the first of two retail order periods for $2.16 billion of California various purpose general obligation bonds, rated A1 by Moody’s Investors Service, A by Standard & Poor’s, and A-minus by Fitch Ratings. A second retail order period is expected Wednesday followed by institutional pricing Thursday.

Yields on the first series, $1.06 billion of various purpose GOs, ranged from 0.87% with a 2% coupon in 2017 to 4% priced at par in 2043. Bonds maturing in 2014 were offered via sealed bid. Portions of bonds maturing between 2017 and 2043 were not offered for retail. The bonds are callable at par in 2023.

Yields on the second series, $1.1 billion of various purpose GO refunding bonds, ranged from 0.87% with a 5% coupon in 2017 to 3.68% with a 4% coupon and 3.38% with a 5% coupon in a split 2033 maturity. Bonds maturing between 2014 and 2016 were offered via sealed bid. Bonds maturing between 2027 and 2032 were not offered for retail. The bonds are callable at par in 2023.

Goldman, Sachs & Co. took indications of interest on $364.2 million of California federally taxable GOs. The bonds had a 0.25% coupon in 2015 and 0.375% coupon in 2016. Spreads were 50 and 65 basis points above the comparable Treasury yield.

Goldman also took indications of interest on a remarketing of $228 million of taxable California Build America Bonds. The bond had a 2.75% coupon in 2039 with 175 basis point spread above the comparable Treasury.

In the rest of the market, traders said munis were performing better than Monday and last week, due to a stronger Treasury market.

“It’s a little cheaper than where we had been the first part of last week so the market has sold off a little,” the second Los Angeles trader said. “For retail, 4s on the long end look attractive.”

He described the market as “cautious” saying, “There is a little support from Treasuries but the market is concerned about being able to absorb supply.”

Stronger Treasuries and a weaker stock market buoyed other primary deals. “The California Department of Water Resources deal got a good bid and that’s stronger,” the first Los Angeles trader said. “Stuff is pricing well. With Treasuries up, it’s a nice day to price. It was worse yesterday so today is catch-up. Trades are mostly flat.”

Ramirez & Co. priced and repriced $537.6 million of the New York City Municipal Water Finance Authority water and sewer system second general resolution revenue bonds, rated Aa2 by Moody’s and AA-plus by Standard & Poor’s and Fitch.

At repricing, yields ranged from 3.257% with a 3.125% coupon in 2027 to 3.47% with a 5% coupon in 2038. The bonds are callable at par in 2023. Yields were lowered one basis point on the 2035 maturity and three basis points on the 2038 maturity from retail pricing.

In the competitive market, Bank of America Merrill Lynch won the bid for $312.8 million of triple-A rated North Carolina refunding GOs. Yields ranged from 0.15% with a 2% coupon in 2013 to 1.58% with a 5% coupon in 2021. Yields on the 2014 maturity were two basis points lower than the respective Municipal Market Data yield. Yields on the 2015 to 2019 maturities were three to eight basis points higher than their respective MMD yields.

In the secondary market, trades compiled by data provider Markit showed weakening.

Yields on Maryland Health and Higher Educational Facilities Authority 5s of 2043 and Florida Board of Governors 5s of 2020 jumped four basis points each to 3.88% and 2.02%, respectively.

Yields on New York City Municipal Water Finance Authority 5s of 2047 increased three basis points to 3.67% while San Francisco Airports Commission 5s of 2031 rose one basis point to 3.59%.

On Tuesday, municipal bond market scales ended weaker following a softer market Monday.

Yields on the Municipal Market Data triple-A GO scale ended as much as four basis points higher. The 30-year yield rose one basis point to 3.09%. The 10-year closed steady at 1.99% while the two-year finished flat at 0.31% for the 16th straight session.

Yields on the Municipal Market Advisors 5% coupon triple-A benchmark scale closed as much as two basis points higher. The 10-year yield and the 30-year yield finished steady at 2.00% and 3.16%, respectively. The two-year was steady at 0.33% for the 11th session.

Treasuries ended mostly stronger Tuesday. The benchmark 10-year yield and the 30-year yield fell three basis points each to 2.03% and 3.22%, respectively. The two-year yield rose one basis point to 0.27%.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.