NEW YORK – The tax-exempt market ended steady Wednesday as the competitive calendar led with a strong tone in the morning, but was followed by mixed reaction in the secondary market in the afternoon.
“I’m seeing the same exact thing on both scores,” said Otis Casey, director of credit research at Markit, referring to a mixed tone in the secondary market as well as the deals being priced well in the primary market.
“The risk aversion seen in other risky assets today on the heels of Tuesday’s FOMC minutes and nervousness about the poor reception to Spain’s bond auction is apparently not strong enough to encourage a flight to safety bid for municipals yet,” he added.
“It seems like traders want to get business done early,” a New York trader said. “The afternoon should see liquidity dry up.”
Munis were steady Wednesday across the curve, according to the Municipal Market Data scale. The two-year yield finished steady at 0.36% for its 13th consecutive trading session while the 10-year yield and 30-year yield also finished flat at 2.16% and 3.42%.
Treasuries continued to strengthen. The two-year yield fell two basis points to 0.35% while the benchmark 10-year yield and the 30-year yield each dropped four basis points to 2.24% and 3.37%.
The competitive market was busy Wednesday as four big deals were sold.
Bank of America Merrill Lynch won the bid for $400 million of revenue bonds for the Port Authority of New York and New Jersey, rated Aa2 by Moody’s Investors Service and AA-minus by Standard & Poor’s and Fitch Ratings.
Yields ranged from 1.59% with a 3% coupon in 2016 to 4.65% with a 4.5% coupon in 2037. Credits maturing between 2013 and 2015, in 2019, between 2022 and 2024, in 2031, 2033, and 2034 were not reoffered. The bonds are subject to the alternative minimum tax and are callable at par in 2022.
Citi won the bid for $270.7 million of South Carolina Transportation Infrastructure Bank revenue bonds, rated A1 by Moody’s and A by Fitch.
Yields ranged from 1.11% with a 4% coupon in 2015 to 4.13% with a 4% coupon in 2033. Credits maturing in 2013 and 2014 were offered via sealed bid. The bonds are callable at par in 2021.
JPMorgan won the bid for $225 million of Michigan taxable general obligations bonds, rated Aa2 by Moody’s and AA-minus by Standard & Poor’s and Fitch.
The bonds ranged from a 0.45% coupon in 2013 to 3.85% coupon in 2026. The credits were priced 30 basis points to 165 basis points above the comparable Treasury yields. The bonds are callable at par in 2022.
Bank of America Merrill Lynch won the bid for $203 million of Delaware Transportation Authority transportation system revenue bonds, rated Aa2 by Moody’s and AA-plus by Standard & Poor’s.
Yields ranged from 0.18% with a 3% coupon in 2013 to 2.85% with a 3% coupon in 2024. Bonds maturing in 2014, 2015, between 2017 and 2020, in 2022, and in 2023 were sold but not available. The bonds are callable at par in 2022.
In the negotiated market, Bank of America Merrill Lynch priced $269 million of Broward County, Fla., certificates of participation, rated Aa3 by Moody’s, A by Standard & Poor’s, and A-plus by Fitch.
Yields ranged from 0.98% with a 4% coupon in 2014 to 4.11% with a 4% coupon in 2028. The bonds are callable at par in 2022.
Data compiled by Markit showed the tone was mixed with half of the eight CUSIP numbers showing weakening. Bonds were weaker anywhere from 4 to 14 basis points including Shelby County, Tenn. 5s of 2022, Puerto Rico Commonwealth 4.375s of 2023 and Hays County, Texas 5s of 2025.
The other half of the bonds were firmer between two and 12 basis points, including Pennsylvania 5.375s of 2019, Port Authority of New York and New Jersey 5s of 2020, and Fort Bend County, Texas 4s of 2028.
In the secondary market, trades reported by the Municipal Securities Rulemaking Board were mostly weaker. A dealer sold to a customer New York’s Empire State Development Corp. 5.77s of 2039 at 4.63%, seven basis points higher than where they traded a week prior.
A dealer sold to a customer commonwealth of Puerto Rico public improvement 5s of 2041 at 5.33%, three basis points higher than where they traded Tuesday. A dealer sold to a customer New York Liberty Development Corp. 5s of 2041 at 4.02%, two basis points higher than where they traded a week before.
Other trades showed firming. A dealer bought from a customer New Jersey Transportation Trust Fund Authority 6.875s of 2039 at 4.74%, nine basis points lower than where they traded last week.
A dealer sold to a customer Austin Community College District Public Facility Corp. 4s of 2031 at 4.06%, two basis points lower than where they traded Tuesday.
