A stronger tone pervaded the municipal market Wednesday, marked by solid reception to competitive deals, an increase in retail participation and falling yields.
Tax-exempts outperformed rising Treasuries on the day, as the latter responded to recent economic indicators. In addition, muni investors have money to spend, and increasingly
"We're getting some things done; things feel a little better today, a little stronger," a trader in New York said. "We're getting clipped here and there, so that's good."
Although retail investors participated on the day's session, yield levels remain higher than their liking, the trader said.
"I wouldn't say retail's back and purchasing, but they're definitely popping their head up," he said. "We could certainly use the selloff to get rates up higher to get retail back in the game; they're just not reacting."
The municipal market picked up speed as the day's session crossed over into the afternoon. January redemption cash-heavy, bond-hungry investors have been driving the small surge, pushing yields as much as several basis points lower at the long end of the curve, according to one market gauge.
As the tax-exempt market has seen little supply in almost a month, it has little left in the tank, a trader in Chicago said.
"It's surprisingly strong today," he said. "The secondary market's running out of supply. A whole lot of things are getting picked up that have been sitting around. There's some first-of-the-month money being put to work."
Investors predicted a small calendar this week. Potential long-term volume is expected to total $1.79 billion, up from a negligible $10.8 million last week.
In the competitive market Wednesday, Bank of America Merrill Lynch won $200 million of New Jersey Educational Facilities Authority Princeton University revenue bonds. The bonds are rated triple-A by the major credit rating agencies.
Yields range from 0.385% with a 5.00% coupon in 2016 to 4.12% with a 5.00% coupon in 2044. The bonds are callable at par in 2024.
The deal performed well and made headlines, the New York trader added. "They blew out of the levels," he said. "It's a good representation of the name: Princeton trades well."
Meanwhile, municipal Market Data reported that Citi won $150 million of Ohio infrastructure improvement general obligation bonds. They were rated Aa1 by Moody's Investors Service and AA-plus by Standard & Poor's.
The bonds were structured with serial maturities between 2015 and 2034. Reportedly, the deal was priced aggressively.
In the negotiated market, B of A Merrill priced $97.5 million of Columbus, Ohio, GOs in $41.8 million taxable and $55.7 million tax-exempt segments. The bonds are rated triple-A by the major credit rating agencies.
Yields in the first taxable series, $30.8 million of various purpose unlimited tax refunding bonds, range from 0.375% priced at par in 2015 to 1.869% priced at par in 2018. They are priced to yield between 28 and 45 basis points over comparable Treasuries.
Yields in the second taxable series, $11 million of various purpose limited tax refunding bonds, range from 0.34% priced at par in 2015 to 1.869% priced at par in 2018. They are priced to yield between 28 and 45 basis points over comparable Treasuries.
Yields in the first tax-exempt series, $33.8 million of various purpose unlimited tax refunding bonds, ranged from 0.60% with a 5.00% coupon in 2017 to 1.82% with a 5.00% coupon in 2020. Yields in the second tax-exempt series, $21.9 million of various purpose limited tax refunding bonds, ranged from 0.37% with a 5.00% coupon in 2016 to 1.82% with coupons of 3.00% and 2.00% in a split maturity in 2020.
JPMorgan and Academy Securities won $75 million of Leon County, Fla., School District sales tax revenue bonds. They are rated Aa3 by Moody's and AA by Fitch Ratings.
Yields range from 0.20% with a 2.00% coupon in 2014 to 3.62% with a 4.00% coupon in 2027. The bonds are callable at par in 2023.
Taxable munis saw an increase in trading on the day, marked by tightening spreads, Interactive Data reported in a daily research brief.
"There appears to be an increased number of trades for points in the curve less than 10 years," Interactive Data wrote. "Spreads on certain Illinois and California shorter dated GO bonds were 10- to 20-basis points tighter."
Trades in the secondary market Tuesday were stronger, according to data from Markit. Yields on Buckeye Ohio Tobacco Settlement Financing Authority 5.875s of 2047 dropped seven basis points to 8.00%
American Municipal Power, Ohio, revenue 5s of 2042 and New York State Dormitory Authority 5s 2042 each fell three basis points to 4.95% and 4.54%, respectively. Yields on California GOs 5s of 2043 and Remington Municipal Utility District, Texas, No. 1 4s of 2021 both inched down one basis point to 4.73% and 2.50%, respectively.
Yields on the Municipal Market Data triple-A scale Wednesday closed steady through four years. Thereafter, they fell by as much as four basis points, with the greatest strength seen in maturities beyond 23 years.
The 10-year triple-A tax-exempt yield skipped down one basis point Wednesday to 2.74%. The 30-year dove four basis points to 4.13%, while the two-year yield held at 0.34% for a third straight session.
The Municipal Market Advisors benchmark triple-A scale saw yields fall Wednesday by as much as two basis points beyond seven years. The 10-year triple-A and 30-year yields each slid one basis point to 2.74% and 4.33%, respectively. The two-year held at 0.35%.
Treasury yields softened across the curve Wednesday. The 10-year yield jumped five basis points to 3.00%. The 30-year inched up one basis point to 3.90%. The two-year yield jumped three basis points to 0.44%.
