NEW YORK – Yields in the municipal market increased slightly Wednesday in light to moderate secondary trading activity.
“There’s actually a little bit of weakness out there right now,” a trader in New York said. “There isn’t a ton of activity, so I’m not sure if they’ll cut the scale ultimately, but it feels off maybe a basis point or two.”
Tax-exempts opened September Wednesday with an uptick in yields after doing so just once the entire month of August.
The Municipal Market Data triple-A scale yielded 2.19% in 10 years and 3.29% in 20 years Wednesday, following 2.18% and a record-low 3.28% Tuesday. The scale yielded 3.68% in 30 years Wednesday, following 3.67% Tuesday.
Despite the slight uptick in yields Wednesday, they have still dropped to all-time lows in 10-year munis 12 times in the past 18 sessions. Also, 30-year tax-exempts set record lows four times in the past nine sessions, while 20-year munis have established all-time lows five times over the same time period.
The record lows currently stand at 2.17% and 3.67% in 10- and 30-year tax-exempts, both established August 25. The 20-year low of 3.28% was set Tuesday.
“I wouldn’t really take today as any sort of evidence that yields are going to start going up on a regular basis,” a trader in Los Angeles said. “We’re weaker by about a basis point overall today, but in pretty light trading, with Labor Day and the long weekend just around the corner."
Wednesday’s triple-A muni scale in 10 years was at 85.2% of comparable Treasuries and 30-year munis were at 100.8%, according to MMD, while 30-year tax-exempt triple-A general obligation bonds were at 112.5% of the comparable London Interbank Offered Rate.
The Treasury market showed losses Wednesday. The benchmark 10-year note was recently at 2.58% after opening at 2.47%.
The 30-year bond was recently quoted at 3.65% after opening at 3.51%. The two-year note was at 0.51% after opening at 0.47%.
In the new-issue market Wednesday, the Tennessee School Bond Authority competitively sold $227 million of debt to Morgan Keegan & Co., with a true interest cost of 3.33%.
The bonds mature from 2011 through 2030, with term bonds in 2035 and 2040. None of the bonds were formally re-offered.
The credit is rated Aa1 by Moody’s Investors Service, AA by Standard & Poor’s, and AA-plus by Fitch Ratings.
Morgan Stanley priced $93.9 million of taxable Build America Bonds for Sunrise, Fla.
The BABs mature in 2030 and 2035, yielding 5.813% and 5.913% respectively, or 3.78% and 3.84% after the 35% federal subsidy, both priced at par.
The bonds are callable at par in 2020, and are subject to a make-whole redemption at Treasuries plus 35 basis points prior to 2020. The credit is rated AA-minus by Standard & Poor’s and AA by Fitch.
RBC Capital Markets priced $90.3 million of GO refunding bonds for Colorado’s Douglas County School District No. RE1.
The bonds mature from 2010 through 2025, with yields ranging from 0.30% with a 2% coupon in 2010 to 3.02% with a 4% coupon in 2025.
The bonds, which are callable at par in 2021, are rated Aa1 by Moody’s and AA-plus by Fitch.
Morgan Keegan & Co. priced $81.7 million of taxable GO bonds in three series, including $62.5 million of taxable BABs.
The BABs mature from 2011 through 2027, with a term bond in 2030. Yields range from 1.055% in 2012, or 0.69% after the 35% federal subsidy, to 5.059% in 2030, or 3.29% after the subsidy, all priced at par. Bonds maturing in 2011 were not formally re-offered.
The bonds were priced to yield between 29.8 and 200 basis points over the comparable Treasury yields and are callable at par in 2020.
Bonds from the $11.7 million taxable series mature from 2011 through 2021 with a term bond in 2027. Yields range from 1.055% priced at par in 2012 to 4.35% priced at par in 2027.
The bonds were priced to yield between 29.8 and 120 basis points over the comparable Treasury yields and are callable at par in 2020.
The deal also contained a $7.5 million series of taxable recovery zone economic development bonds, which mature in 2032 and yield 5.209% priced at par. The bonds were priced to yield 155 basis points over the comparable Treasury yield and are callable at par in 2020.
The credit is rated triple-A by both Moody’s and Standard & Poor’s.
In economic data released Wednesday, the overall economy grew for the sixteenth straight time after seven months of contraction, while the manufacturing sector expanded for the thirteenth time after eighteenth months of contraction.
According to the Institute for Supply Management’s monthly report on business, the ISM index gained to 56.3 in August from 55.5 in July. Economists polled by Thomson Reuters predicted the index would hold at 55.5.
Construction spending slid 1.0% in July as private residential construction sharply decreased.
At the same time, June’s construction spending was revised sharply lower to a 0.8% decline from an originally reported 0.1% increase.
Economists expected July construction spending would rise 0.1%, according to the median estimate from Thomson Reuters.
Visible Supply
The Bond Buyer’s 30-day visible supply fell $494.7 million to $5.958 billion. The total is comprised of $1.125 billion of competitive bonds and $4.833 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.
