NEW YORK – The municipal market was flat to slightly weaker Thursday amid light to moderate secondary trading activity.
Traders said tax-exempt yields were largely unchanged inside of 20 years, but slightly elevated in the longer maturities.
“It feels a little bit weaker,” a trader in Los Angeles said. “We could be off as much as three basis points, mostly out on the long end, but we’re still somewhat flat on the short end. There’s some decent activity in the secondary too.”
The Municipal Market Data triple-A 10-year scale rose three basis points Thursday to 3.22%, the 20-year scale was up three basis points to 4.53%, and the scale for 30-year debt climbed three basis points to 4.74%.
“There’s a bit of weakness out long, but it’s somewhat quiet,” a trader in New York said. “I’d say we’re down maybe two basis points max.”
Thursday’s triple-A muni scale in 10 years was at 94.4% of comparable Treasuries and 30-year munis were at 104.6%, according to MMD. Meanwhile, 30-year tax-exempt triple-A general obligation bonds were at 111.3% of the comparable London Interbank Offered Rate.
The Treasury market showed some gains Thursday. The benchmark 10-year note was quoted recently at 3.42% after opening at 3.46%. The 30-year bond was quoted recently at 4.54% after opening at 4.54%. The two-year note was recently quoted at 0.69% after opening at 0.71%.
Municipalities continue their hiatus from borrowing money this week as they are once again slated to sell a meager amount of new debt.
State and local governments are scheduled to sell just $723.6 million of bonds this week, according to The Bond Buyer and Ipreo data, an uncommonly small amount of debt.
This is the supply lull municipal market participants were looking forward to during the spasm of bond sales in the fourth quarter. A $131.2 billion flurry of debt issuance in the fourth quarter helped propel the municipal bond market to a record $431 billion of issuance in 2010.
In the new-issue market Thursday, JPMorgan priced $249 million of revenue bonds for the Massachusetts Development Finance Agency, on behalf of the Partners Health Care System, in three series.
Bonds from the $75.1 million Series K-4 contain a split maturity in 2035, yielding 2.89% with 3% and 5% coupons. These bonds are not callable.
Bonds from the $43.8 million Series K-5 contain a split maturity in 2031, yielding 3.50% with 3.5% and 5% coupons. These bonds are not callable.
Bonds from the $130.1 million Series K-6 mature from 2014 through 2021, with term bonds in 2037 and 2041. Yields range from 1.98% with a 4% coupon in 2014 to 5.45% with a 5.375% coupon in 2041. These bonds are callable at par in 2020, except bonds maturing in 2021, which are not callable.
The bonds, which are not callable, are rated Aa2 by Moody’s Investors Service and AA by both Standard & Poor’s and Fitch Ratings.
JPMorgan priced $154.8 million of public education capital outlay bonds for the Florida State Board of Education.
The bonds mature from 2012 through 2032, with term bonds in 2036 and 2040. Yields range from 1.97% with a 5% coupon in 2015 to 5.22% with a 5.125% coupon in 2040. Bonds maturing from 2012 through 2014 and from 2022 through 2026 were not formally re-offered.
The bonds, which are callable at par in 2020, are rated Aa1 by Moody’s and AAA by both Standard & Poor’s and Fitch.
Morgan Stanley priced $131.2 million of revenue bonds for the Dormitory Authority of the State of New York.
The bonds mature from 2011 through 2026, with term bonds in 2031 and 2040. Yields range from 1.68% with a 3% coupon in 2012 to 6.15% with a 6% coupon in 2040.
The bonds, which are callable at par in 2020, are rated Baa1 by Moody’s and BBB-plus by both Standard & Poor’s and Fitch.
In economic data released Thursday, initial claims rose by 18,000 to 409,000 the week ending Jan. 1, but the four-week moving average fell to its lowest level in more than two years.
Continuing claims fell to 4.103 million for the week ending Dec. 25.
Economists expected 400,000 initial claims and 4.1 million continuing claims.
Weekly initial claims tend to fluctuate widely from week to week and the figure for the week ending Dec. 25 was revised upward to 391,000 from 388,000. That’s still the lowest level since July 2008.
Initial claims have declined from a 2010 high of 504,000 the week ending Aug. 14.
Estimates for nonfarm payrolls spiked this week after ADP reported a 297,000 gain in the smaller private-sector job sector.
The economic indicator is viewed as an early signal for Friday morning’s December employment situation report.
IFR expects nonfarm payrolls to increase 200,000 in December — little better than a return to trend from November’s surprisingly weak 39,000 gain. That expectation represents a 150,000 rise.
IFR also expects the jobless rate to dip to 9.7% from 9.8%.
Visible Supply
The Bond Buyer's 30-day visible supply rose $96.9 million to $8.692 billion. The total is comprised of $1.611 million of competitive bonds and $7.081 billion of negotiated bonds.
Previous Session's Activity
The Municipal Securities Rulemaking Board reported 52,931 trades of 18,877 issues for volume of $12.08 billion. Most active was Rochester, Minn., 5s of 2038 that traded 523 times at a high of 101.850 and a low of 99.000.
