Market Close: Munis Trade Within Range, Following Treasury Lead

The municipal bond market was described as “range bound” Thursday as uncertainty over the direction of interest rates kept yield movements limited.

Even with better than expected jobless claims Thursday morning and stronger equities, Treasuries moved only a few basis points.

“We are in a range,” a New York trader said. “There are economic numbers here and there that push the Treasury market each way but it’s not moving much. There is not a lot of activity and no one is making a decision.”

The trader said deals in the municipal primary market over the last few weeks went well and were distributed, but this week saw only smaller deals. “We saw the tax-time outflows but now I’m not sure what we are waiting for. For underwriting, banks are vying for business so they are cutting spreads. It’s very tough.”

Munis followed the direction of Treasuries after jobless claims came in better than expected. Claims dropped 16,000 to 339,000 for the week ending April 20. The decline was larger than the 2,000 drop expected by economists. Traders also eyed GDP numbers expected Friday morning.

Other municipal traders cited a lack of conviction in either direction. “This morning it picked up a bit but has tailed off,” a trader located in the Southwest region said. “It seems like a lot of people are off desks or waiting for direction from the primary. There is also a lot of uncertainty about the economy and Fed policy going forward.”

“It feels weaker in the secondary,” a Chicago trader said. “There is not a lot of depth in the secondary. It feels heavy.”

This trader added that he is cutting bonds to get trades done. “After you buy, if you don’t sell in a few hours then there is no depth. We are looking at stuff that has been sitting around for a few weeks.”

What little primary was left this week priced Thursday and two issuers in Virginia led the way. Citi won the bid in the competitive market for $148.1 million of Virginia Public School Authority school financing bonds, rated double-A-plus by Standard & Poor’s and Fitch Ratings and Aa1 by Moody’s Investors Service.

Yields ranged from 0.25% with a 3% coupon in 2014 to 3.36% with a 3.5% coupon in 2033. The bonds are callable at par in 2023.

Also in Virginia, Bank of America Merrill Lynch priced $101.4 million of triple-A rated Virginia Housing Development Authority taxable mortgage bonds. The bonds were priced at par to yield 2.75% in 2042.

Rice Financial priced $329.6 million of Houston refunding bonds, rated AA by Standard & Poor’s and Fitch.

Yields on the first series of $267.9 million ranged from 0.39% with a 3% coupon in 2015 to 3.38% with a 5% coupon in 2043. Bonds maturing in 2014 were offered via sealed bid. The bonds are callable at par in 2023.

Details on the second series of $61.7 million of taxable bonds were not available by press time.

In the secondary market, trades compiled by data provider Markit showed a mix of strengthening and weakening.

Yields on Massachusetts Bay Area Transportation Authority 5s of 2041 and Washington 5s of 2034 increased three basis points each to 3.14% and 2.14%, respectively. Yields on California 4s of 2043 rose one basis point to 3.95%.

Other trades were stronger. Yields on Maryland Department of Transportation 5s of 2027 dropped four basis points to 2.20% and California’s Golden State Tobacco Securitization Corp. 5s of 2033 fell three basis points to 5.71%.

Yields on Frisco, Texas, 5s of 2021 dropped two basis points to 1.62% and Phoenix, Ariz., 5s of 2021 slid one basis point to 0.94%.

Overall for the week in retail trades of under 100 bonds — or $100,000 par value — secondary activity was mixed with more buy trades but fewer sell trades than the previous week, according to data from BondDesk Group.

There were 58,357 buy trades for the week ending April 24 compared to the previous week’s 58,055 buy trades. The number of buy trades was the third highest in the last five weeks.

Sell trades for the week ending April 24 fell to 35,384 versus the previous week’s 36,116 trades. Sell trades were the third highest in the previous five weeks.

The ratio of buy trades to sell trades held steady at 1.6, right at where the ratio has been for the past three weeks. Before that, the ratio of buy trades to sell trades came in at 1.7 and 1.8.

Dollar volume traded also fell for the week ending April 24. There were $1.564 billion buy trades for the week compared to the $1.606 billion buy trades for the week before. It was the second lowest buy trades in dollar amount during the past five weeks.

Sell trades fell to $970 million compared to the previous week’s $1.054 billion sell trades. Sell trades for the week ending April 24 was the second lowest in the previous five weeks.

The ratio of buy trades to sell trades in dollar amount increased to 1.6 from the previous week’s 1.5.

Municipal bond scales ended steady to one basis point stronger Wednesday after posting small losses earlier in the week.

Yields on the Municipal Market Data 5% triple-A GO scale ended as much as one basis point stronger. The 10-year was steady at 1.70% for the seventh consecutive session and the 30-year closed unchanged at 2.90% for the fifth trading session. The two-year closed steady at 0.29% for the 15th session.

Yields on the Municipal Market Advisors 5% scale also ended flat to one basis point stronger. The 10-year yield finished flat at 1.77% for the second straight session and the 30-year closed unchanged at 3.02% for the sixth session. The two-year was flat at 0.32% for the 15th straight session.

Treasuries ended a few basis points weaker Thursday following a slightly stronger day Wednesday. The benchmark 10-year and 30-year yields increased two basis points to 1.72% and 2.91%, respectively. The two-year was steady at 0.24%.

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