Market Close: Muni Demand Outweighs Supply As S.C. Prices Rich

Demand for bonds in the secondary market outweighed a light new issue calendar of under $540 million this week, allowing muni prices to gain for a second session.

One of the only significant high-grade deals in the primary this week priced in the competitive market Tuesday, leaving traders focused on secondary activity. Triple-A rated South Carolina auctioned $143.1 million of general obligation bonds that came richer to Monday’s benchmark scales.

“The deal came firm and rich, but there are no deals this week so it’s not a surprise,” a Chicago trader said. “And JPMorgan buys anything high-grade, especially a state general obligation bond.”

JPMorgan bought two portions of the three-part $143.1 million South Carolina GOs, rated triple-A by Moody’s Investors Service and Fitch Ratings and AA-plus by Standard & Poor’s.

JPMorgan won the bid for $85 million of GO state economic development bonds. Yields ranged from 0.17% with a 2% coupon in 2015 to 2.63% with a 5% coupon in 2023. Bonds with 5% coupons maturing between 2015 and 2023 were priced three basis points richer than Monday’s Municipal Market Data scale.

JPMorgan won the bid for $23.2 million of GO state highway refunding bonds. Yields ranged from 0.15% with a 2% coupon in 2014 to 2.12% with a 5% coupon in 2021. Bonds with 5% coupons maturing between 2016 and 2021 were priced 11 to 15 basis points richer than Monday’s MMD scale.

Wells Fargo won the bid for $34.9 million, in a deal divided into three series.

Yields on the first series, $16.5 million of GO state research university infrastructure bonds, ranged from 0.17% with a 3% coupon in 2014 to 3.55% with a 4% coupon in 2028.

Yields on the second series, $3.4 million of Winthrop University bonds, ranged from 0.17% with a 3% coupon in 2014 to 3.153% with a 3% coupon in 2025.

Yields on the third series, $15 million of Lander University bonds, ranged from 0.17% with a 3% coupon in 2014 to 3.55% with a 4% coupon in 2028.

Spreads on those series ranged from two basis points richer than Monday’s MMD scale to two basis points cheaper than the scale on bonds maturing between 2201 and 2023.

Outside the new issue market, munis were “quietly firming,” the Chicago trader said.

One New York trader said the market driven higher as buyers gobbled up shorter maturing bonds in the secondary. “It’s actually a bit busy with buyers on the front-end,” he said, adding the tone in the general market was steady to slightly firmer.

Trades compiled by data provider Markit showed firming.

Yields on Pennsylvania 5s of 2021 slid four basis points to 2.3% and Connecticut 5s of 2027 fell two basis points to 3.63%.

Yields on California State Public Works Board 5.25s of 2032 and New Jersey State Turnpike Authority 5s of 2029 fell two basis points each to 4.62% and 4.13%, respectively.

Yields on Wisconsin 5s of 2020 and Baltimore 5s of 2025 fell one basis point each to 1.97% and 3.25%, respectively.

On Tuesday, the triple-A Municipal Market Data scale ended as much as three basis points stronger, extending gains to a third consecutive session. The 10-year yield slid one basis point to 2.65% and the 30-year yield fell three basis points to 4.10%. The two-year closed unchanged for the ninth session at 0.33%.

Yields on the Municipal Market Advisors benchmark scale ended as much as two basis points firmer. The 10-year yield fell one basis point to 2.71% and the 30-year yield dropped two basis points to 4.34%. The two-year was steady for the second session at 0.37%.

Treasuries were stronger Tuesday. The benchmark 10-year and 30-year yields slid three basis points each to 2.71% and 3.80%, respectively. The two-year was steady at 0.30%.

The Bond Buyer indexes were mostly higher in the last week.

The 20-Bond GO Index of 20-year general obligation yields increased one basis point this week to 4.61%. The index is at its highest level since Nov. 14 when it was 4.64%.

The 11-Bond GO Index of higher-grade 20-year GO yields gained one basis point this week to 4.32%, which is its highest level since Nov. 14 when it was 4.35%.

The Bond Buyer’s Revenue Bond Index, which measures 30-year revenue bond yields, fell three basis points this week to 5.23%. This is the lowest the index has been since Nov. 14 when it was also 5.23%.

The yield on the U.S. Treasury’s 10-year note decreased eight basis points this week to 2.71%, its lowest level since Nov. 14 when it was 2.69%.

The yield on the Treasury’s 30-year bond declined nine basis points this week to 3.80%, the lowest it has been since Nov. 14 when it was 3.79%.

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