The tax-exempt market extended gains into Wednesday as munis continued to follow Treasuries higher.
Municipal bond traders said firmer munis were also helped by relatively limited new issue supply and an overall constructive tone. Both primary and secondary markets were active.
“The market is four to six basis points stronger across the board,” a Los Angeles trader said. “It’s limited supply but also Treasuries are stronger. People are not optimistic about corporate earnings and so they are moving back to Treasuries. Munis are following.”
There was a strong consensus in the market that munis were higher across the board. “There is quite a bit of trading going on,” a Chicago trader said. “It’s firming up out there with hardly any supply.”
“I just got some bids back from a list that we had out this morning for 2022 to 2031 maturities and they were very strong,” he added. “The secondary bid side is much stronger the last two days than it has been in weeks.” He said there is active trading across the curve.
The primary market has also seen great reception so far this week. “The new deals that are being priced this week have had good support and desks are willing to make secondary bids,” said Dan Toboja, vice president at Ziegler Capital Markets, adding the $80 million Tift County, Ga., Hospital Authority deal for the Tift Regional Medical Center was 10 times oversubscribed.
“While the forward supply still appears manageable there is talk that a large amount of shadow supply is still lurking,” Toboja added. “With the overall tone still fragile after December, a lack of significant supply might be the best explanation for the strength of the last couple trading days.”
In the primary market Wednesday, Jefferies & Co. priced for retail $805 million Metropolitan Transportation Authority’s Triborough Bridge and Tunnel Authority refunding bonds. Institutional pricing is expected Thursday. The bonds were expected to price this past December, but were postponed due to market conditions.
The sale included $625 million of subordinate bonds, rated A1 by Moody’s Investors Service, A-plus by Standard & Poor’s and Fitch Ratings, and AA-minus by Kroll Bond Rating Agency.
The sale also contained $180 million of senior bonds, rated Aa3 by Moody’s, AA-minus by Standard & Poor’s and Fitch, and AA by Kroll.
Details were not available by press time.
Bank of America Merrill Lynch priced $133.2 million of Oklahoma Municipal Power Authority power supply system revenue bonds, rated A by Standard & Poor’s and Fitch.
Yields ranged from 3.26% with a 3.125% coupon in 2028 to 3.97% with a 4% coupon in 2047. The bonds are callable at par in 2023.
Barclays priced $87.1 million of Board of Regents of Texas State University System revenue and refunding bonds, rated Aa2 by Moody’s and AA by Fitch.
Yields ranged from 0.20% with a 2% coupon in 2013 to 3.17% with a 5% coupon in 2042. The bonds are callable at par in 2023.
In the competitive market, JPMorgan won the bid for $334.3 million of triple-A rated Fairfax County, Va., general obligation bonds.
Yields on the first series, $206.3 million of public improvement bonds, ranged from 0.18% with a 1.5% coupon in 2013 to 2.28% with a 5% coupon in 2032. The bonds are callable at par in 2021.
Yields on the second series, $128 million of public improvement refunding bonds, ranged from 0.30% with a 3% coupon in 2014 to 2.16% with a 3% coupon in 2025. The bonds are callable a t par in 2023.
In the secondary market, trades compiled by data provider Markit showed strengthening.
Yields on Texas Municipal Gas Acquisition & Supply Corp. 5s of 2032 dropped five basis points to 3.95% while Puerto Rico Public Buildings Authority 5.25s of 2042 fell four basis points to 5.41%.
Yields on Wisconsin 5s of 2022 plunged four basis points to 1.79% while Georgia 5s of 2020 dropped three basis points to 1.22%.
Yields on Pennsylvania Housing Finance Agency 3.3s of 2032 fell two basis points to 3.37% while New York City Municipal Water Finance Authority 5s of 2045 fell one basis point to 3.25%.
Yields on Ohio’s Buckeye Tobacco Settlement Financing Authority 5.875s of 2030 and New Jersey Transportation Trust Fund Authority 5s of 2038 fell one basis point each to 6.87% and 3.38%, respectively.
The Municipal Market Data scale ended stronger Wednesday for the third consecutive session. The 10-year yield dropped four basis points to 1.69% while the 30-year yield fell three basis points to 2.80%. The two-year yield dropped two basis points to 0.34%.
Treasuries also posted small gains. The benchmark 10-year yield and the 30-year yield each finished one basis point lower at 1.86% and 3.06%, respectively. The two-year yield fell one basis point to 0.25%.
