NEW YORK – The municipal market was slightly weaker Thursday as the New York City Municipal Water Finance Authority came to market with $750 million of taxable Build America Bonds.
Traders said tax-exempt yields rose one to three basis points in spots.
“It’s feeling somewhat weaker out there,” a trader in Los Angeles said. “We’re probably down anywhere from one to three basis points, just pretty much weakening as you go out longer. As we’ve been weakening recently, the long end has held in pretty well, but I think we’re definitely down a good two or three basis points out long today.”
In the new-issue market, Barclays Capital priced $750 million of taxable BABs for the New York City Municipal Water Finance Authority.
The BABs mature in 2041 and 2043 and were priced to yield 190 and 155 basis points over the comparable Treasury yield.
Bonds maturing in 2041 are callable at par in 2020. Bonds maturing in 2043 contain a make-whole call at Treasuries plus 40 basis points.
The credit is rated Aa2 by Moody’s Investors Service and AA-plus by both Standard & Poor’s and Fitch Ratings.
The Municipal Market Data triple-A scale yielded 2.40% in 10 years and 3.34% in 20 years Thursday, following 2.39% and 3.33% Wednesday. The scale yielded 3.76% in 30 years Thursday, following 3.73% Wednesday.
In nine of the past 11 sessions, at least one of the 10-, 20-, or 30-year yields have risen. Before the recent sell-off, yields dropped to all-time lows in 10-year munis 12 times in the previous 17 sessions. Also, 30-year tax-exempts set record lows four times in the previous eight sessions, while 20-year munis 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 Aug. 25. The 20-year low of 3.28% was set Aug. 31.
Thursday’s triple-A muni scale in 10 years was at 87.0% of comparable Treasuries and 30-year munis were at 95.9%, according to MMD, while 30-year tax-exempt triple-A GO bonds were at 105.3% of the comparable London Interbank Offered Rate.
The Treasury market showed losses Thursday. The benchmark 10-year note was quoted near the end of the session at 2.76% after opening at 2.72%.
The 30-year bond was quoted near the end of the session at 3.93% after opening at 3.87%. The two-year note was quoted near the end of the session at 0.49% after opening at 0.48%.
Elsewhere in the new-issue market Thursday, Morgan Stanley priced $197.8 million of limited project revenue bonds for the University of California Regents.
The bonds mature from 2011 through 2024, with yields ranging from 0.60% with a 2% coupon in 2012 to 3.42% with a 4% coupon in 2024. Bonds maturing in 2011 were decided via sealed bid.
The bonds, which are callable at par in 2020, are rated Aa2 by Moody’s and AA-minus by Standard & Poor’s.
Morgan Stanley also priced $121.1 million of GO refunding bonds for Cook County, Ill.
The bonds mature in 2025, 2026, and 2028, yielding 3.79%, 3.88%, and 4.00%, all with 5% coupons. The yields on bonds maturing in 2025 and 2026 were raised eight basis points at re-pricing, while 2028 yields remained at 4.00%.
The bonds, which are callable at par in 2020, are rated Aa2 by Moody’s and AA by both Standard & Poor’s and Fitch.
JPMorgan priced $73.7 million of water pollution control loan fund refunding revenue bonds for Ohio.
The bonds mature from 2018 through 2022, with yields ranging from 2.25% with a 5% coupon in 2018 to 2.91% with a 3% coupon in 2022.
The bonds, which are not callable, are rated triple-A by both Moody’s and Standard & Poor’s.
In economic data released Thursday, producer prices increased 0.4% in August due to higher energy prices to post their largest gain since March, the Commerce Department reported Thursday. Core producer prices, excluding food and energy goods, rose 0.1%.
Economists expected a gain of 0.3% in producer prices and 0.1% in core prices, according to the median estimate from Thomson Reuters.
Manufacturing activity in the Philadelphia area unexpectedly contracted in September, as the general business conditions index edged upward to negative 0.7 from a previous reading of negative 7.7, according to the Federal Reserve Bank of Philadelphia monthly report on business.
Economists surveyed by Thomson Reuters predicted a positive reading of 1.5 in the report, which covers eastern Pennsylvania, southern New Jersey, and Delaware. Positive readings indicate expansion.
Initial jobless claims fell by 3,000 filings during the week ending Sept. 11 to 450,000 — the lowest level since July. Continuing claims fell to 4.485 million for the week ending Sept. 4.
Economists expected 460,000 initial claims and 4.46 million continuing claims, according to the median estimate from Thomson Reuters.
Visible Supply
The Bond Buyer’s 30-day visible supply fell $1.798 billion to $9.636 billion. The total is comprised of $2.066 billion of competitive bonds and $7.569 billion of negotiated bonds.
Previous Session's Activity
The Municipal Securities Rulemaking Board reported 43,766 trades of 16,115 issues for volume of $16.21 billion. Most active was Chicago 6.207s of 2032 that traded 165 times at a high of 105.000 and a low of 101.500.
