NEW YORK – Tax-exempts were slightly firmer Tuesday as 20-year municipals dropped to another record low, albeit with light to moderate secondary trading activity.
“There’s a bit of a firmer tone,” a trader in New York said. “There isn’t a whole lot of activity though, so I’m not sure you can call it anything other than flat at this point. Maybe we’re better a basis point or so, but there’s just not a lot trading.”
The Municipal Market Data triple-A scale yielded 2.18% in 10 years and an all-time low of 3.28% in 20 years Tuesday, following 2.19% and 3.30% Monday. The scale yielded 3.67% in 30 years Tuesday, following 3.69% Monday.
20-year tax-exempts set a new record low for the fifth time in the past eight sessions. Additionally, while not setting records today, yields have still dropped to new all-time lows in 10-year munis 12 times in the past 17 sessions. Also, 30-year tax-exempts set new record lows four times in the past eight sessions.
The 20-year yield of 3.28% is a new record low, while 2.18% is one basis point higher than the 10-year record of 2.17%, established last Wednesday. The 3.67% level for 30-year bonds matches the all-time record, which also was set Wednesday.
“There is definitely some firmness out there, but it’s a quiet week,” a trader in Los Angeles said. “We’re going to pick up maybe a basis point, maybe two, but it’s the week before Labor Day. There’s just not a lot trading.”
Tuesday’s triple-A muni scale in 10 years was at 87.9% of comparable Treasuries and 30-year munis were at 104.3%, according to MMD, while 30-year tax-exempt triple-A general obligation bonds were at 116.9% of the comparable London Interbank Offered Rate.
The Treasury market showed gains Tuesday. The benchmark 10-year note was recently at 2.47% after opening at 2.52%.
The 30-year bond was recently quoted at 3.52% after opening at 3.58%. The two-year note was at 0.48% after opening at 0.50%.
In the new-issue market Tuesday, Bank of America Merrill Lynch priced $600 million of turnpike revenue Build America Bonds for the Pennsylvania Turnpike Commission.
The bonds mature in 2045 and 2049, yielding 5.511%, or 3.58% after the 35% federal subsidy, and 5.561%, or 3.61% after the subsidy, both priced at par. The bonds were priced to yield 195 and 200 basis points over the comparable Treasury yield.
The bonds, which contain a make-whole call at Treasuries plus 30 basis points, are rated Aa3 by Moody’s Investors Service and A-plus by both Standard & Poor’s and Fitch Ratings.
Goldman, Sachs & Co. priced $183.2 million of contract tax bonds for Texas’ Harris County Flood District.
The bonds mature from 2024 through 2030, with term bonds in 2034 and 2039. Yields range from 2.96% with a 5% coupon in 2024 to 3.94% with a 5% coupon in 2039.
The bonds, which are callable at par in 2020, are rated AAA by both Standard & Poor’s and Fitch.
Morgan Stanley priced $72.9 million of mortgage revenue bonds for the New York State Mortgage Agency in four series.
Bonds from the $14.8 million series mature from 2011 through 2022, with term bonds in 2025 and 2028. Yields range from 0.40% in 2011 to 4.00% in 2028, all priced at par. The bonds are callable at par in 2019.
Bonds from the $5.2 million series mature from 2011 through 2018, with yields ranging from 0.40% in 2011 to 2.50% in 2018, all priced at par. The bonds are not callable.
Bonds from the $14.3 million series mature from 2011 through 2017, with yields ranging from 0.40% in 2011 to 2.30% in 2017, all priced at par. The bonds are not callable.
Bonds from the $38.6 million series, which is subject to the alternative minimum tax, mature from 2011 through 2021, with term bonds in 2023 and 2024. Yields range from 1.15% in 2011 to 4.35% in 2024, all priced at par. The bonds are callable at par in 2019.
The credit is rated Aaa by Moody’s.
Topeka, Kan., competitively sold $36.7 million of GO bonds to Piper Jaffray & Co., in two series.
Bonds from the $35.0 million Series B mature from 2011 through 2027, with term bonds in 2030 and 2036. Coupons range from 2% in 2011 to 4.375% in 2036. None of the bonds were formally re-offered. The bonds are callable at par in 2015.
Bonds from the $1.7 million Series A mature from 2011 through 2027, with term bonds in 2030. Coupons range from 2% in 2011 to 4% in 2030. None of the bonds were formally re-offered. The bonds are callable at par in 2015.
The credit is rated Aa2 by Moody’s.
In economic data released Tuesday, the Chicago Purchasing Managers’ Business Barometer fell to 56.7 in August from 62.3 in July. Economists polled by Thomson Reuters predicted a 50.4 reading for the indicator.
The consumer confidence index climbed to 53.5 in August from an upwardly revised 51.0 last month. The July index was originally reported as 50.4. Economists polled by Thomson Reuters predicted the index would be 50.4.
Visible Supply
The Bond Buyer’s 30-day visible supply rose $289.0 million to $6.453 billion. The total is comprised of $1.231 billion of competitive bonds and $5.222 billion of negotiated bonds.
Previous Session's Activity
The Municipal Securities Rulemaking Board reported 34,888 trades of 14,302 issues for volume of $8.19 billion. Most active was Fenton, Mo., 4.75s of 2021 that traded 151 times at a high of par and a low of 99.250.
