Secondary trading was the focus of the municipal bond market Thursday with most of the primary deals priced earlier in the week.
Tax-exempt bonds with shorter maturities were in demand, keeping the focus of most trading within five years, which helped keep those yields flat even as they rose on longer-maturing bonds.
“We are not as negative,” a Chicago trader said. “We are seeing business at these levels and at least getting bids.”
The market was steady inside three to four years, he said, and yields were higher two basis points through 2020. Beyond that, yields rose three to four basis points. “It’s getting better but it’s still down,” the trader said. “We are getting to a point where we are starting to see some things happen. We are cheap to everything. Business has to get done.”
Other traders said the short-end of the market held up well against losses on longer-maturing bonds. “The short-end bid is holding up well,” a New York trader said. “It’s seven years and in.”
The Chicago trader even noted some strength and said $1.7 million of triple-A rated Maryland general obligation bonds maturing in 2017 traded five basis points through the Municipal Market Data scale.
Two remaining large deals of the week priced in the primary market Thursday. Citi priced $212.5 million of Kentucky Asset Liability Commission bonds for the Federal Highway Trust Fund, rated Aa3 by Moody’s Investors Service, AA by Standard & Poor’s, and A-plus by Fitch Ratings.
Yields ranged from 1.54% with 2% and 5% coupons in a split 2017 maturity to 4.04% with 4% and 5.25% coupons in a split 2025 maturity. The bonds are callable at par in 2023.
JPMorgan priced $99.4 million of Board of Regents for Oklahoma Agricultural and Mechanical Colleges at Oklahoma State University. The bonds are rated AA-minus by Standard & Poor’s, and AA by Fitch.
Yields on the first series, $19.4 million of general revenue refunding bonds, ranged from 0.25% with a 2% coupon in 2014 to 4.66% with a 4.5% coupon in 2033. The bonds are callable at par in 2023. Yields were raised three basis points on bonds maturing in 2032 and 2033 from preliminary pricing.
Yields on the second series, $80 million of general revenue bonds, ranged from 0.25% with a 2% coupon in 2014 to 4.98% with a 4.875% coupon and 4.91% with a 5% coupon in a split 2043 maturity. The bonds are callable at par in 2023. Yields were raised two and three basis points on bonds maturing between 2030 and 2033 in repricing.
In the secondary market, trades compiled by data provider Markit showed weakening.
Yields on New Jersey Tobacco Settlement Financing Corp. 4.625s of 2026 rose five basis points to 6.25% and Columbus, Ohio, 5s of 2024 increased four basis points to 3.14%.
Yields on New York City Municipal Water Finance Authority 5.25s of 2044 rose four basis points to 4.77% and Washington 5s of 2024 increased two basis points to 3.23%.
Yields on Dallas-Fort Worth International Airport 5s of 2026 rose two basis points to 4.27% and Louisiana Public Facilities Authority 5s of 2042 rose one basis points to 5.25%.
Thursday, yields on the Municipal Market Data scale ended as much as two basis points higher. The 10-year yield increased one basis point to 2.77%. The 30-year was steady at 4.31% for the second session and the two-year finished flat at 0.43% for the seventh consecutive session.
Yields on the Municipal Market Advisors scale ended as much as two basis points higher. The 10-year yield increased two basis points to 2.96% and the 30-year yield rose one basis point to 4.39%. The two-year was steady at 0.54% for the second session.
The Treasury yield curve steepened. The two-year yield fell two basis points to 0.34% while the 30-year yield increased one basis point to 3.66%. The benchmark 10-year was steady at 2.59%.
Trading activity was lower each day this week for all recorded trades according to Interactive Data.
On Monday, there were $5.221 billion trades, down from the previous Monday’s $5.715 billion. The number of trades fell to 43,362 from 43,864. The buy-to-sell ratio all dipped to 1.0 from 1.17.
By Tuesday, activity picked up slightly with $7.607 billion traded, down from the previous Tuesday’s $8.003 billion. There were 50,936 trades, up from the last Tuesday’s 50,799. The buy-to-sell ratio fell to 1.15 from 1.43.
Wednesday, $8.802 billion was traded, down from the $10.413 billion a week earlier. The number of trades fell to 49,355 from 52,610. The buy-to-sell ratio slipped to 1.46 from 1.80.
In odd-lot trades, or those under 100 bonds, activity fell for the week ending July 24 from the week before, but was still the second highest in four weeks.
Buy trades fell to 86,574 from 89,749 for the week ending July 17. There were 39,947 sell trades, down from the previous week’s 40,835. The ratio of buy to sell trades held steady at 2.2.
Par value traded was also the second highest in four weeks. For the week ending July 24, there were $2.241 billion buy trades, down from the previous week’s $2.310 billion. Sell trades were $1.049 billion, down from $1.073 billion the week before. The buy-to-sell ratio fell to 2.1 from 2.2.