New supply drove activity in the municipal market Wednesday, but failed ultimately to leave much of a mark.
Investors hungry for paper pounced on the smorgasbord of offerings that underwriters wheeled out before them. But the banquet did little to push yields noticeably.
“New issue is the name of the game right now,” said a trader in New York. “That’s where people are buying, and that’s how you can lure customers in, for sure. The new issues that I saw did very, very well … over-subscribed. That has been the case over the past week.”
Still, there many empty serving platters in the secondary market, which traders said saw sparse activity in the slim pickings of bid-wanteds throughout the day.
“It was quiet across the board,” he said. “I saw a bit more bid-wanteds today, but not a whole lot of them trading; just people pricing the market.”
Grinding through the day, traders say yields looked a little firmer, particularly in quality names. One market gauge set triple-A yields one basis point firmer beyond 24 years on the curve.
Investor, though, restricted their demand largely to the primary market, traders said. The feeding frenzy over the week’s new deals led to “lackluster” activity in the secondary, a trader in Chicago said.
“The secondary continues to be on life support,” he said. “There’s not a lot of flow. What focus there is seems to be in the primary market. There might be some blocks trading here and there.”
The primary market expects supply to total $7.64 billion this week, compared with a revised $7.44 billion last week. Industry watchers say the market has been absorbing the volume with little difficulty.
On the negotiated side Wednesday, Bank of America Merrill Lynch priced for retail $564.1 million of Honolulu city and county general obligation bonds in three series. The bonds are rated Aa1 by Moody’s Investors Service and AA-plus by Fitch Ratings.
Yields in the first series, $256.9 million, range from 0.84% with a 4.00% coupon in 2017 to 3.18% with a 4.00% coupon in 2036. Debt maturing in all years from 2024 through 2037, except 2027, 2030, and 2036, was not offered to retail.
Yields in the second series, $274.6 million, range from 0.65% with a 5.00% coupon in 2016 through 2.59% with a 4.00% coupon in 2027. Credits maturing in 2024 through 2026 were not offered to retail.
Yields in the third series, $32.6 million, range from 0.30% with a 2.00% coupon to 2.84% with a 2.75% coupon in 2027. The bonds in all three series are callable at par in 2022.
Morgan Stanley priced $231.5 million of Wake Forest Baptist Medical Center hospital refunding revenue bonds in two series. The bonds are rated Aa3 by Moody’s and AA-minus by Standard & Poor’s.
Yields in the first series, $118.8 million, arrived at 3.92% with a 4.00% coupon and 3.48% with a 5.00% coupon in a split maturity in 2045. Yields in the second series, $112.7 million, ranged from 0.44% with a 3.00% coupon in 2014 to 3.51% with a 4.00% coupon and 3.20% with a 5.00% coupon in a split maturity in 2033.
Yields were lowered four basis points for credits maturing at the front end of the curve in the second series from the morning’s retail order period. The bonds in both series are callable at par in 2022.
First Southwest priced $206.3 million of Conroe Independent School District, Texas, unlimited tax school building and refunding bonds. The bonds are rated Aaa/Aa2 by Moody’s Investors Service and AAA/AA by Standard & Poor’s.
Yields range from 0.34% with coupons of 2.00% and 4.00% in a split maturity in 2014 to 2.77% with a 5.00% coupon in 2035. Credits maturing in 2013 were offered in a sealed bid.
Yields were lowered from one to four basis points throughout the curve at repricing. The bonds are callable at par in 2021.
Citi priced $156.1 million of Chesapeake, Va., Transportation System senior toll road revenue bonds in two series. The bonds are rated triple-B by Standard & Poor’s and Fitch.
Yields in the first series, $105.1 million of current interest bonds, ranged from 2.12% with a 3.00% coupon in 2018 to 4.25% priced at par in 2042. Credits maturing in 2047 were not offered to retail. The bonds are callable at par in 2022.
Debt in the second series, $51 million of capital appreciation bonds, was not offered to retail. The bonds are callable at par in 2028.
In the competitive market, B of A Merrill won $119.4 million of Minneapolis-St. Paul Metropolitan Council GO wastewater revenue refunding bonds. The bonds are rated triple-A by both Moody’s and Standard & Poor’s.
Yields range from 0.48% with a 4.00% coupon in 2016 to 2.48% with a 3.00% coupon in 2026. Credits maturing in 2027 and 2028 were sold but not available. The bonds are callable at par in 2022.
The calendars over the past month have largely hovered in the $6-to-$8 billion range. They are not expected to pick up until after the U.S. elections, a trader in Chicago said.
“After election day, it seems there are a number of deals on the calendar that will have a material impact on the supply situation,” he said. “But through October, it looks like next week will be similar to this week.”
The benchmark 10-year muni yield remained unchanged Wednesday at 1.72%, according to Municipal Market Data. The two-year held at 0.30% for the 21st consecutive trading session. The 30-year yield ticked down one basis point to 2.83%.
Treasuries yields ended Wednesday’s session marginally higher. The benchmark 10-year yield climbed one basis point to 1.77%.
The 30-year yield rose two basis points to 2.93%. The two-year yield held steady at 0.30%.