The municipal bond market ended only slightly weaker Wednesday after Federal Reserve Chairman Ben Bernanke said the Fed will continue buying $85 billion a month of bonds, though it may  start tapering the pace of purchases in a few months.

In a testimony to the Congressional Joint Economic Committee, Bernanke said removing monetary policy accommodation now could halt the recovery.

“Unfortunately, withdrawing policy accommodation at this juncture would be highly unlikely to produce such conditions,” Bernanke said. “A premature tightening of monetary policy could lead interest rates to rise temporarily but would also carry a substantial risk of slowing or ending the economic recovery and causing inflation to fall further.”

Both stocks and bonds rallied, then started to weaken in the afternoon as Bernanke suggested the Fed could start tapering the asset purchases. In the afternoon, the Federal Open Market Committee minutes were released, showing members agreed the “pace and ultimate size of its asset purchases would depend on the Committee’s continued assessment of the outlook for the labor market and inflation in addition to its judgments regarding the efficacy and costs of additional purchases and the extent of progress toward its economic objectives.”

Treasuries ended weaker for the day. The benchmark 10-year yield jumped nine basis points to 2.03% and the 30-year yield spiked up seven basis points to 3.21%. The two-year yield rose one basis point to 0.26%.

Munis appeared unaffected. “I haven’t seen munis move dramatically and [they] may be weaker by a basis point or two,” a New York trader said, adding the institutional pricing of New York City’s nearly $1 billion deal was received well given a choppy Treasury market in the middle of pricing.

Other traders said munis weren’t following Treasury yields higher. “No one is selling munis so it’s not following Treasuries,” a second New York trader said. “Some of the smaller deals had good demand.”

Bank of America Merrill Lynch priced for institutions $950 million of New York City general obligation bonds, rated A2 by Moody’s Investors Service and AA by Standard & Poor’s and Fitch Ratings.

Yields on the first series of $242.3 million ranged from 0.46% with 2%, 3%, and 5% coupons in a split 2015 maturity to 2.59% with a 5% coupon in 2025. Bonds maturing in 2013 and 2014 were offered via sealed bid. The bonds are callable at par in 2023. Yields were raised as much as four basis points from the second retail pricing Tuesday and yields were already increased five basis points from the first retail order period Monday.

Yields on the second series of $707.7 million ranged from 0.46% with a 5% coupon in 2015 to 3.00% priced at par in 2027. Bonds maturing in 2014 were offered via sealed bid. The bonds are callable at par in 2023. Yields were raised as much as four basis points from the second retail pricing Tuesday after yields were already increased five basis points from Monday’s retail order period.

Goldman, Sachs & Co. priced and repriced $452.1 million of Los Angeles Department of Water and Power System revenue bonds, rated Aa3 by Moody’s and AA-minus by Standard & Poor’s and Fitch.

Yields ranged from 0.78% with 3%, 4% and 5% coupons in a split 2017 maturity to 3.16% with a 5% coupon in 2032. The bonds are callable at par in 2023. Yields were raised as much as eight basis points on bonds maturing outside 2022 from preliminary pricing after being increased as much as nine basis points from retail pricing Tuesday.

Barclays priced and repriced $141.1 million of Ohio University general receipts bonds, rated Aa3 by Moody’s and A-plus by Standard & Poor’s.

Yields ranged from 0.17% with a 2% coupon in 2013 to 3.67% with a 5% coupon in 2043. The bonds are callable at par in 2022. Yields on bonds maturing inside 2023 were lowered as much as eight basis points from preliminary pricing and bonds maturing in 2032 were lowered six basis points. Yields on bonds maturing in 2028 were raised 10 basis points.

In the competitive, Wells Fargo won the bid for $298 million of Florida State Board of Education public education capital outlay refunding bonds, rated Aa1 by Moody’s and triple-A by Standard & Poor’s and Fitch.

Yields ranged from 0.35% with a 5% coupon in 2015 to 3.42% with a 4% coupon in 2034. The bonds are callable at par in 2023.

In the secondary market, trades compiled by data provider Markit showed weakening.

Yields on Illinois 5.1s of 2033 jumped five basis points to 5.00%.

Yields on California 5s of 2043 and Illinois’ Metropolitan Pier and Exposition Authority 0s of 2041 rose three basis points each to 3.55% and 4.88%, respectively.

Yields on South Carolina Transportation Infrastructure Bank 4s of 2033 rose three basis points to 3.64% and New York City Transitional Finance Authority 5s of 2030 increased one basis points to 2.89%.

Yields on the Municipal Market Data scale were as much as two basis points weaker Wednesday. The 10-year and 30-year yields increased two basis points each to 1.86% and 3.04%, respectively. The two-year held steady at 0.28% for the 10th session.

The Municipal Market Advisors 5% scale showed yields rising as much as four basis points. The 10-year and 30-year yields increased three basis points each to 1.93% and 3.15%. The two-year yield held steady at 0.33% for the ninth consecutive session.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.