NEW YORK – The municipal market was slightly firmer Tuesday amid light to moderate secondary trading activity, as Minnesota competitively sold $865 million of debt.
“We picked up a couple basis points outside of five or so years,” a trader in Los Angeles said. “We might be flat on the really short end of the curve, but for the most part, you’re talking a bump of one, two, maybe three basis points. It feels firmer.”
Leading the new-issue market Tuesday, Minnesota competitively sold $865 million of general obligation bonds, broken into three pieces.
A $635 million tax-exempt component was sold to RBC Capital Markets. Bonds mature from 2011 through 2028, with yields ranging from 0.23% with a 3% coupon in 2011 to 4.00% priced at par in 2030. Bonds maturing in 2012, 2016, and from 2026 through 2028 were not formally re-offered. The bonds are callable at par in 2020.
These bonds will raise proceeds to finance programs and projects for a variety of purposes, including educational facilities, parks, and pollution-control facilities.
A second tax-exempt piece, with $225 million in par value, was sold to Piper Jaffray & Co. Bonds mature from 2011 through 2020, with yields ranging from 2.43% with a 5% coupon in 2019 to 3.84% with a 4% coupon in 2029. Bonds maturing from 2011 through 2018, and in 2020, 2024, 2025, and 2030 were not formally re-offered. The bonds are callable at par in 2020.
These bonds will raise money for improvements and projects on the state's trunk highway system.
A $5 million taxable portion of the deal, sold to Morgan Keegan & Co., will be used to finance programs for the state's Rural Finance Authority. The bonds mature in 2015, yielding 1.80% with a 3% coupon.
Minnesota will have $5.6 billion of outstanding GO debt after this deal. The state is rated Aa1 by Moody's Investors Service and AAA by Fitch Ratings.
Also, Siebert Brandford Shank & Co. priced $706.6 million of state aid revenue notes to the Michigan Finance Authority in three series.
Notes from the $255.9 million Series D-1 mature in 2011 yielding 0.80% with a 2% coupon.
Notes from the $247.9 million Series D-2 mature in 2011 yielding 0.40% with a 2% coupon.
Notes from the $202.8 million Series D-3 mature in 2011 yielding 0.40% with a 2% coupon.
The credit is rated SP-1-plus by Standard & Poor’s.
The Treasury market mostly showed some gains Tuesday. The benchmark 10-year note was quoted recently at 2.91% after opening at 2.96%. The 30-year bond was quoted recently at 4.04% after opening at 4.06%. The two-year note was quoted recently at 0.55% after opening at 0.55%.
The Municipal Market Data triple-A scale yielded 2.57% in 10 years and 3.65% in 20 years Tuesday, following levels of 2.58% and 3.67% Monday. The scale yielded 3.96% in 30 years Tuesday, matching 3.97% Monday.
“It’s a bit of a quiet start, but there is some firmness out there,” a trader in New York said. “We’re probably up a basis point or two in spots.”
Monday’s triple-A muni scale in 10 years was at 87.2% of comparable Treasuries and 30-year munis were at 97.8%, according to MMD, while 30-year tax-exempt triple-A general obligation bonds were at 99.8% of the comparable London Interbank Offered Rate.
Elsewhere in the new-issue market Tuesday, Bank of America Merrill Lynch priced $150.4 million of lottery revenue bonds for the West Virginia Economic Development Authority.
The bonds mature from 2011 through 2030, with term bonds in 2035 and 2040. Yields range from 0.55% with a 2% coupon in 2011 to 4.67% with a 5% coupon in 2040.
The bonds, which are callable at par in 2040, are rated A1 by Moody’s, AAA by Standard & Poor’s, and A-plus by Fitch.
In economic data released Tuesday, personal income and consumption were both flat in June on a seasonally adjusted annual rate.
Core PCE, which excludes food and energy costs, was also flat in June, but increased 1.4% from a year ago. The flat reading in monthly core PCE was the first since a string of three months of unchanged core PCE readings from October to December 2008.
Economists expected personal income to increase 0.2% and for consumption to increase 0.1%, according to the median estimate from Thomson Reuters.
Pending home sales fell 2.6% to a reading of 75.7 in June, a record low, from a revised 29.9% decrease to 77.7 in May, originally reported as a 30.0% decrease to 77.6.
Thomson Reuters’ poll of economists had predicted a 79.0 reading.
U.S. factory orders fell 1.2% in June, the second straight monthly decline, and more than double the drop economists expected, the Commerce Department reported Tuesday.
Orders excluding transportation fell 1.1%, the third consecutive decline.
Economists expected factory orders would fall 0.5% for the month, according to the median estimate from Thomson Reuters.
Visible Supply
The Bond Buyer’s 30-day visible supply rose $435.2 million to $7.776 billion. The total is comprised of $2.057 billion of competitive bonds and $5.719 billion of negotiated bonds.
Previous Session's Activity
The Municipal Securities Rulemaking Board reported 38,323 trades of 13,537 issues for volume of $10.02 billion. Most active was taxable Clark County, Nev., 6.15s of 2030 that traded 137 times at a high of par and a low of 99.890.
