The tax-exempt market ended weaker for a sixth session as bids wanted in the secondary pushed prices down. Still, that didn’t stop the week’s largest issuers from tapping the market, including the first Detroit name to appear since the city’s July 18 bankruptcy filing.
Traders in the tax-exempt market gobbled up the high yields offered by Michigan Finance Authority’s $92 million state aid revenue notes for the School District of Detroit. Priced by JPMorgan, the notes yielded 4.375% priced at par maturing in August 2014.
That is down from the 4.5% offered during preliminary pricing. The bonds are rated SP-1 by Standard & Poor’s. Traders in the tax-exempt market said the deal was very well received and oversubscribed.
With the focus on primary, traders said the secondary market finished weaker with many bids wanted surfacing in the morning.
“People are cutting bonds but there are still a lot of people on vacation,” a New York trader said. “Traditionally it’s a slow end of summer.”
Other deals in the primary market had mixed reception, with underwriters lowering yields on the short-end of the curve, while raising yields on longer-maturing bonds.
Bank of America Merrill Lynch repriced the week’s largest deal, $849.2 million of the New Jersey Transportation Trust Fund Authority transportation program bonds. The bonds are rated A1 by Moody’s Investors Service and A-plus by Standard & Poor’s and Fitch Ratings.
Yields ranged from 0.68% with a 2.00% coupon in 2015 to 5.22% with a 5% coupon in 2044. The bonds are callable at par in 2023. Yields were raised two basis points on bonds maturing between 2022 and 2026 from preliminary pricing. Yields were lowered three basis points on bonds maturing in 2039 and 2044.
B of A Merrill also repriced for institutions $302.4 million of triple-A rated Columbus, Ohio, general obligation bonds following retail pricing Monday.
Yields in the first series of $216.8 million of various purpose unlimited tax bonds ranged from 0.46% with a 5.00% coupon in 2015 to 4.53% with a 4.5% coupon in 2034. The bonds are callable at par in 2023.
In repricing, yields were lowered as much as eight basis points, with most of the movements on bonds maturing between 2027 and 2033.
Yields had already been lowered between two and five basis points on bonds maturing between 2015 and 2018 from retail pricing Monday. Yields were raised as much as three basis points on bonds maturing between 2019 and 2024, and in 2034 from retail pricing.
Spreads on bonds with 5% coupons ranged from three to 28 basis points above Monday’s Municipal Market Data scale.
Yields in the second series of $85.6 million of various purpose limited tax bonds ranged from 0.46% with a 4% coupon in 2015 to 4.28% with a 4.125% coupon in 2029. The bonds are callable at par in 2023.
Yields were lowered one basis point on bonds maturing in 2017 and lowered four basis points on bonds maturing in 2027 in repricing. Yields were raised as much as three basis points on bonds maturing between 2018 and 2022.
Yields had already been lowered between two and five basis points on bonds maturing between 2015 and 2018 from retail pricing. Yields were raised as much as five basis points between 2019 and 2029 from retail pricing.
Spreads on bonds with 5% coupons ranged from 16 basis points to 35 basis points over Monday’s MMD scale.
JPMorgan priced $146.7 million of University of Washington general revenue bonds, rated Aaa by Moody’s and AA-plus by Standard & Poor’s.
Yields ranged from 0.18% with a 2% coupon in 2014 to 4.76% with a 5% coupon in 2041. The bonds are callable at par in 2023. Yields were raised as much as seven basis points from preliminary pricing, with the biggest adjustments coming on bonds maturing between 2019 and 2022.
Spreads on bonds with 5% coupons ranged from 20 basis points to 38 basis points over Monday’s MMD scale.
In the secondary market, traders said investors continued to shorten duration of bonds and the market felt one to two basis points weaker on the long-end.
“We are seeing about 2,500-plus items on the bids wanted list,” in both odd-lots and block-size trades, a second New York trader said. “Much of it is noise.
“I am focusing on providing liquidity to accounts in the secondary space,” this trader said. “Rate volatility is a concern in the taxable space as we see the curve steepening. Accounts are shortening duration and moving towards defensive structures, which has been the case since the market unwind in June.”
Analysts at Interactive Data noted the largest declines in prices in the secondary market came in the five-year range.
“Focus is on several bidlists that were scheduled to trade earlier in the session, which may provide a clearer indication of price movement once bids and trades are posted,” they added.
Trades compiled by data provider Markit showed weakening. Yields on New York 5s of 2028 rose two basis points to 4.21%.
Yields on South Central, Conn., Regional Water Authority 5s of 2043 increased five basis points to 5.05% and Fargo, N.D., 4.5s of 2036 rose three basis points to 4.65%.
Yields on Charlotte, N.C., Airport 5s of 2041 and Texas Municipal Gas Acquisition & Supply Corp. 5s of 2031 rose four basis points each to 5.38% and 5.59%, respectively.
Tuesday, yields on the triple-A Municipal Market Data scale ended as much as six basis points higher. The 10-year and 30-year yields finished steady at 2.90% and 4.40%, respectively. The two-year finished flat at 0.43% for the 25th straight session.
Yields on the Municipal Market Advisors scale ended as much as two basis points higher. The 10-year yield rose one basis point to 3.05%. The 30-year was steady at 4.51% and the two-year was flat at 0.55% for the fourth session.
Treasuries were stronger Tuesday, regaining Monday’s losses.
The benchmark 10-year yield slid six basis points to 2.82% and the 30-year yield fell four basis points to 3.86%.
The two-year was steady at 0.36%.