The tax-exempt market stabilized Wednesday as a lack of supply offset lax demand.
One trader in Minnesota said retail buyers focused on bonds maturing within five years and beyond 15 years. “There is not much inventory and not as many sellers as we’ve had in a while and no [new-issue] calendar,” he said.
Retail participation appeared to improve as the day progressed. “It’s weaker, but not as much as Tuesday,” a trader in Atlanta said. “There’s nothing dramatic today. It feels like there is more attention in the secondary but it’s not real active. There is a little bit more retail activity.”
Amid a light new issue calendar in the holiday shortened week that is expected to be about $1.6 billion down from last week’s nearly $4 billion the week’s largest deals priced Wednesday. Still, traders focused more on the secondary market and said retail sellers pushed prices lower in the morning session.
“It’s softer again this morning maybe three to four basis points,” a New York trader said. “People are not willing to position much. It’s going to be down another three basis points the next day and it’s not worth it.”
Selling pressure came from retail investors who “are dumping paper.” In turn, mutual funds continue to sell holdings, this trader said. “It’s not a terrible mass exodus but there is definitely some selling pressure.”
Trades compiled by data provider Markit showed weakening. Yields on New Jersey State Turnpike Authority 5s of 2043 rose three basis points to 5.18% and Pennsylvania Turnpike Commission 5s of 2033 rose two basis points to 5.16%.
Yields on Wisconsin Health and Educational Facilities Authority 5.25s of 2035 and Dallas Fort-Worth International Airport 5s of 2035 increased two basis points each to 5.66% and 5.60%, respectively.
In the week’s largest deal, Wells Fargo completed the pricing of $94.9 million of Board of Regent of Texas A&M University System revenue financing bonds, rated Aaa by Moody’s Investors Service and AA-plus by Standard & Poor’s and Fitch Ratings.
Yields ranged from 0.82% with a 1.875% coupon in 2016 to 4.12% with a 5% coupon in 2028. The bonds are callable at par in 2023. Bonds with 5% coupons yielded nine basis points to 32 basis points above Tuesday’s Municipal Market Data scale.
Tuesday, Wells priced $240 million of taxable bonds for the university. The bonds were priced at par to yield 0.38% in 2014 to 4.972% in 2043. Spreads ranged from 10 basis points to 115 basis points above the comparable Treasury yield. The bonds are callable at par in 2023.
JPMorgan priced $121.4 million of Jacksonville, Fla., taxable and tax exempt bonds, rated Aa2 by Moody’s, AA-minus by Standard & Poor’s and AA by Fitch.
The first pricing of $86.3 million consisted of tax-exempt bonds. Yields on the first series, $54.6 million of special revenue and refunding bonds, ranged from 0.41% with a 2% coupon in 2014 to 5.18% with a 5% coupon in 2040. The bonds are callable at par in 2023. Yields were lowered as much as five basis points in repricing.
Yields on the second series of $31.7 million of special revenue refunding bonds, ranged from 4.33% with a 5.25% coupon in 2027 to 4.73% with a 5.25% coupon in 2030. The bonds are callable at par in 2023.
The second pricing consisted of $35.1 million of taxable bonds. The bonds were priced at par to yield 0.54% in 2014 to 4.643% in 2026. Spreads ranged from 50 basis points to 175 basis points above the comparable Treasury yield.
Bank of America Merrill Lynch won the bid for $215.5 million of Portland, Ore., second lien sewer system revenue and refunding bonds, rated Aa3 by Moody’s and AA-minus by Standard & Poor’s.
Yields ranged from 0.18% with a 3% coupon in 2014 to 4.82% with a 5% coupon in 2038. The bonds are callable at par in 2023.
Wednesday, yields on the triple-A Municipal Market Data scale ended flat. The 10-year finished steady at 3.02% and the 30-year was unchanged at 4.49%. The two-year finished flat at 0.43% for the 35th straight session.
Yields on the Municipal Market Advisors scale ended mostly steady. The 10-year and 30-year yields ended unchanged at 3.14% and 4.59%, respectively. The two-year closed unchanged at 0.55% for the 14th session.
Treasuries were weaker for the second session. The two-year and 10-year yields increased four basis points each to 0.46% and 2.90%, respectively. The 30-year yield rose one basis point to 3.80%.