NEW YORK – Tax-exempt yields backed up slightly Wednesday amid weakening Treasuries and the pricing of some of the week’s larger deals in the primary, one of which was downsized by more than $200 million.
Traders said tax-exempt yields were mostly higher by one or two basis points.
“There’s been quite a bit of supply out there nationally this week and last, and with Treasuries off a little bit today, we ended up a little bit weaker,” a trader in Los Angeles said. “I’m not sure we’re off more than a couple basis points, but there’s definitely a softer tone out there.”
Leading the new-issue market Wednesday, Morgan Stanley priced $500 million of taxable Build America Bonds for Arizona’s Salt River Project Agricultural Improvement & Power District.
The BABs mature in 2041 and yield 4.839% priced at par, or 3.15% after the 35% federal subsidy. The bonds were priced to yield 115 basis points over the comparable Treasury yield.
The debt, which is subject to a make-whole redemption at Treasuries plus 20 basis points, is rated Aa1 by Moody’s Investors Service and AA by Standard & Poor’s.
The Municipal Market Data triple-A scale yielded 2.34% in 10 years Wednesday, up two basis points from Tuesday’s 2.32%, while the 20-year scale edged up one basis point to 3.28%, up from Tuesday’s all-time low of 3.27%. The scale for 30-year debt yielded 3.69%, one basis point higher than Tuesday’s 3.70%.
The 20-year low of 3.27% lasted one day before reverted to 3.28%, the scale’s previous record low. That record was originally set Aug. 31, and was matched Thursday, Friday, and Monday, before being broken Tuesday. Yields on the 10-year and 30-year triple-A scale bottomed out at 2.17% and 3.67%, respectively, on Aug. 25.
“There was some activity out on the Street, but the bulk of the attention was on the primary, as it’s been this entire week,” a trader in New York said. “Some of those issuers had to make some concessions to get their deals done, particularly that Ohio deal.”
JPMorgan priced $350.4 million of GO refunding bonds for Ohio in multiple series, downsized from the $540 million of debt offered to retail investors Tuesday. Additionally, many of the yields were raised by five to 10 basis points from the retail pricing.
Bonds from the $121.3 million series mature from 2015 through 2022, with yields ranging from 1.41% with a 5% coupon in 2015 to 3.01% with a 4.25% coupon in 2022. The bonds are not callable.
Bonds from the $176.5 million series mature from 2015 through 2022, with yields ranging from 1.41% with a 5% coupon in 2015 to 3.01% with a 5% coupon in 2022. The bonds are not callable.
Bonds from the $26.8 million series mature from 2013 through 2020, with yields ranging from 0.74% with a 2% coupon in 2013 to 2.72% with a 2.5% coupon in 2020. The bonds are not callable.
Bonds from the $25.8 million series mature from 2014 through 2019, with yields ranging from 1.07% with a 2% coupon in 2014 to 2.52% with a 4% coupon in 2019. The bonds are not callable.
The credit is rated Aa1 by Moody’s and AA-plus by both Standard & Poor’s and Fitch.
Wednesday’s triple-A muni scale in 10 years was at 93.6% of comparable Treasuries and 30-year munis were at 100.0%, according to MMD, while 30-year tax-exempt triple-A general obligation bonds were at 111.5% of the comparable London Interbank Offered Rate.
The Treasury market showed was weaker Wednesday. The benchmark 10-year note was quoted recently at 2.50% after opening at 2.47%.
The 30-year bond was quoted recently at 3.68% after opening at 3.66%. The two-year note was quoted recently at 0.45% after opening at 0.43%.
The Treasury Department auctioned $29 billion of seven-year notes, with a 1 7/8% coupon, a 1.890% high yield, a price of 99.90. The bid-to-cover ratio was 3.04. The Federal Reserve banks bought $913.6 million for their own account in exchange for maturing securities.
Elsewhere in the new-issue market Wednesday, the Pennsylvania Housing Finance Agency came to market with $354 million of debt over two issues.
Barclays Capital priced $250 million of single family mortgage revenue for the Pennsylvania Housing Finance Agency in two series.
Bonds from the $116.5 million series, which are subject to the alternative minimum tax, mature from 2014 through 2020, with a term bond in 2025. Yields range from 2.45% in 2014 to 4.75% in 2025, all priced at par. The bonds are callable at par in 2019.
Bonds from the $133.5 million series, which are not subject to the AMT, mature from 2011 through 2021, with term bonds in 2025, 2030, and 2039. Yields range from 0.45% in 2011 to 4.75% in 2039, all priced at par. The bonds are callable at par in 2019.
Also, Morgan Stanley priced $104 million of single family mortgage revenue bonds for the Pennsylvania Housing Finance Agency.
The bonds mature from 2011 through 2020, with term bonds in 2025 and 2028. Yields range from 0.45% in 2011 to 3.05% with a 4.5% coupon in 2028. The bonds are callable at par in 2019.
The credit is rated Aa2 by Moody’s and AA-plus by Standard & Poor’s.
The economic calendar was light Wednesday.
Visible Supply
The Bond Buyer’s 30-day visible supply fell $2.680 billion to $16.028 billion. The total is comprised of $3.523 billion of competitive bonds and $12.505 billion of negotiated bonds.
Previous Session's Activity
The Municipal Securities Rulemaking Board reported 39,977 trades of 15,848 issues for volume of $11.14 billion. Most active was taxable Illinois Build America Bonds 6.63s of 2035 that traded 114 times at a high of 102.250 and a low of par.
