The municipal bond market ended on a mostly steady tone Thursday, even as one Michigan issuer postponed its sale and Chicago bonds traded weaker.
Facing headwinds from Detroit’s bankruptcy, Fifth Third Securities pulled a $60.6 million Saginaw County, Mich., general obligation limited tax pension obligation bond deal from the market Thursday afternoon.
“This deal has been officially postponed,” the underwriter said in a message to investors. “The levels that it would have taken to do the deal did not meet the issuer’s parameters. We will look to bring this deal back at a later date.”
Saginaw County controller Robert Belleman told The Bond Buyer in April that it would probably pull the deal if the county had to pay more than 4.25%. That is the ceiling at which the projected savings will not be achieved, he said at the time. The finance team in February, months ahead of the market’s record rise in rates and Detroit’s bankruptcy, was predicting a 3.6% interest rate.
Fifth Third Securities released indications of interest Thursday morning, with spreads coming in on par with price talks on Tuesday. Spreads to Treasuries ranged from 45 basis points in 2014 to 200 basis points in 2033. The bonds are callable at par in 2023. The bonds are rated Aa3 by Moody’s Investors Service.
Traders said prices were not cheap enough.
In other primary market news, JPMorgan won the bid for $128.1 million of New York’s Nassau County general obligation bonds, rated A2 by Moody’s, A-plus by Standard & Poor’s, and A by Fitch Ratings.
Yields ranged from 0.81% with a 4% coupon in 2015 to 5.08% with a 5% coupon in 2043. The bonds are callable at par in 2023.
Bank of America Merrill Lynch priced $138.4 million of South Carolina Jobs-Economic Development Authority hospital refunding and improvement revenue bonds for Palmetto Health.
The bonds are rated Baa1 by Moody’s and BBB-plus by Standard & Poor’s and Fitch.
Yields ranged from 1.08% with a 2.5% coupon in 2014 to 5.36% with a 5.25% coupon in 2030. The bonds are callable at par in 2023.
In the secondary market, a New York trader said activity was busier in the morning. By the afternoon, traders waited for Wednesday’s $673 million Puerto Rico Electric Power Authority revenue bonds to free up in the secondary.
José Pagán Beauchamp, acting President for the Government Development Bank for Puerto Rico said Thursday the deal was two times oversubscribed with orders totaling over $1.5 billion. More than 60 institutional investors bought PREPA bonds, he said.
“We are very pleased with the investor reception for this transaction,” he said. “We are excited to be back in the municipal bond market as we make way to execute the next transactions in our financing plan. We must underscore that this deal will improve the liquidity of the Commonwealth’s bonds in the secondary market.”
Outside Puerto Rico bonds, trading was relatively quiet. “It’s quiet but a firm tone,” a second New York trader said. “There is not as much supply in the pipeline today and Treasuries are up.”
According to Interactive Data, several Chicago issuers, including Chicago Board of Education, Chicago Water, Chicago GOs, and Cook County, Ill., continued to trade lower this week following the city’s three-notch downgrade to A3 by Moody’s.
Other trades compiled by data provider Markit showed weakening.
Yields on Delaware Economic Development Authority 5.375s of 2045 jumped six basis points to 5.67% and Pennsylvania 5s of 2020 rose four basis points to 2.22%.
Yields on Los Angeles Department of Airports 4s of 2031 and New York’s Metropolitan Transportation Authority 5s of 2042 rose two basis points each to 4.75% and 5.07%, respectively.
Yields on California 5s of 2043 and Texas 5s of 2020 increased one basis point each to 4.81% and 2.10%, respectively.
Thursday, yields on the Municipal Market Data scale ended steady to one basis point lower.
The 10-year yield slipped one basis point to 2.72%. The 30-year was steady at 4.28% for the third session and the two-year finished flat at 0.43% for the 17th consecutive session.
Yields on the Municipal Market Advisors scale were mostly flat Thursday. The 10-year and 30-year yields were steady for the third session at 2.90% and 4.34%, respectively. The two-year was unchanged at 0.54% for the second session.
Treasuries were steady to one basis point firmer Thursday after posting gains Wednesday.
The benchmark 10-year and 30-year yields slid one basis point each to 2.59% and 3.67%, respectively. The two-year was steady at 0.31%.
In the week ending Aug. 7, odd-lot buy trades increased while sell trades fell, according to BondDesk Group, which tracks trades under 100 bonds.
The number of buy trades increased to 86,057 from 84,717 for the week ending July 31, reversing a two-week drop. Sell trades fell to 37,070 from 38,025 the week before, extending losses into the fourth consecutive week.
The ratio of buy trades to sell trades rose to 2.3, the highest in five weeks.
Par value of buy trades rose to $2.218 billion from the previous week’s $2.211 billion.
The increase reversed a two-week drop in value. Par value of sell trades fell to $1.002 billion from $1.039 billion, extending a drop into the fourth consecutive week.
The buy to sell ratio increased to 2.2, the highest in three weeks.