NEW YORK - The municipal market endured another session of pronounced losses Wednesday, as yields climbed 10 to 12 basis points amid continued uncertainty over the future of Build America Bonds, driving 20-year yields to 17-month highs.
"There's still a very palpable fear of the unknown out there in regards to the future of the BAB program," a trader in Los Angeles said. "There's still some optimism something could get done, but it seems like the sentiment is shifting back towards an expectation that the program will be done in about three weeks. Today, we're just picking up from yesterday and just getting routed out there."
In the new-issue market Wednesday, Goldman, Sachs & Co. priced $1.8 billion of taxable BABs for the New Jersey Turnpike Authority. The deal was upsized by $350 million from the originally planned $1.5 billion.
The bonds mature in 2041 and yield 7.102%, priced at par, or 4.62% after the 35% federal subsidy. The bonds were priced to yield 262.5 basis points over the 30-year Treasury yield.
The credit is rated A3 by Moody's Investors Service, A-plus by Standard & Poor's, and A by Fitch Ratings.
The Municipal Market Data triple-A scale yielded 3.00% in 10 years Wednesday, up 13 basis points from Tuesday's 2.87% to its highest level since 3.01% on Nov. 18, while the 20-year scale rose 12 basis points to a 4.23% yield, its highest since July 7, 2009, when it was also 4.23%. The scale for 30-year debt widened 14 basis points to 4.62%, matching its highest mark since Nov. 17.
"The shorter and intermediate maturities are playing a little catch up after mostly sitting out yesterday's sell-off," a trader in New York said. "That's not to say the long end isn't cheapening up considerably as well, because it is."
Wednesday's triple-A muni scale in 10 years was at 92.6% of comparable Treasuries and 30-year munis were at 103.8%, according to MMD. Meanwhile, 30-year tax-exempt triple-A general obligation bonds were at 111.6% of the comparable London Interbank Offered Rate.
The Treasury market was weaker Wednesday. The benchmark 10-year note was quoted recently at 3.23% after opening at 3.12%. The 30-year bond was quoted recently at 4.43%, after opening at 4.37%. The two-year note was quoted recently at 0.61% after opening at 0.53%.
Amid the muni sell-off, the San Francisco Public Utilities Commission postponed until next week its competitive pricing of $173.5 million of tax-exempt bonds and $350 million of BABs Wednesday due to market conditions.
Elsewhere in the new-issue market, Bank of America Merrill Lynch priced $252.2 million of taxable BABs for the University of Missouri Curators.
The BABs mature in 2041, yielding 5.792% at par, or 3.76% after the 35% federal subsidy. The bonds were priced to yield 135 basis points over the 30-year Treasury yield.
The debt is rated Aa1 by Moody's and AA-plus by Standard & Poor's.
Goldman, Sachs & Co. priced $230 million of taxable and tax-exempt debt for Ohio, including $46 million of taxable BABs.
The BABs mature in 2019 and 2020, yielding 4.844% and 4.994%, both priced at par, or 3.15% and 3.25% after the 35% federal subsidy.
The bonds, which were priced to yield 160 and 175 basis points over the 10-year Treasury yield, contain a make-whole call at Treasuries plus 30 basis points.
The $184 million tax-exempt series matures from 2011 through 2018, with yields ranging from 0.83% with a 3% coupon in 2012 to 2.88% with a 5% coupon in 2018. Bonds maturing in 2011 were decided via sealed bid. These bonds are not callable.
The credit is rated Aa1 by Moody's, AA by Standard & Poor's, and AA-minus by Fitch.
Morgan Stanley priced $226.1 million of taxable and tax-exempt debt for New York's Westchester County Health Care Corp., including $68.8 million of taxable BABs.
The $37.4 million Series A BABs mature in 2040, yielding 8.572% priced at par, or 5.57% after the 35% federal subsidy. The bonds were priced to yield 414 basis points over the 30-year Treasury yield and contain a make-whole call at Treasuries plus 55 basis points.
The $31.4 million BAB Series C-1 also matures in 2040, yielding 8.572% priced at par, or 5.57% after the 35% federal subsidy. The bonds were priced to yield 414 basis points over the 30-year Treasury yield and contain a make-whole call at Treasuries plus 55 basis points.
The $124.9 million tax-exempt Series B matures from 2011 through 2020, with term bonds in 2030 and 2037. Yields range from 2.77% with a 4% coupon in 2012 to 6.35% with a 6.125% coupon in 2037. These bonds are callable at par in 2020.
The $32.4 million tax-exempt Series C-2 matures in 2037, yielding 6.35% with a 6.125% coupon. These bonds are callable at par in 2020.
The credit is rated A3 by Moody's and BBB by Standard & Poor's.
Barclays Capital priced $145.8 million of limited tax GO bonds for Nevada in two series. Yields were selectively raised by up to 12 basis points at re-pricing.
Bonds from the $121.9 million Series C mature from 2013 through 2029, with yields ranging from 1.54% with a 3% coupon in 2013 to 5.10% with a 5% coupon in 2029. These bonds are callable at par in 2020.
Bonds from the $23.9 million Series D mature from 2015 through 2020, with term bonds in 2025, 2030, and 2038. Yields range from 2.22% with a 3% coupon in 2015 to 5.31% with a 5% coupon in 2038. These bonds are callable at par in 2020.
Nevada also came to market with an additional $20.7 million of limited tax GO bonds, priced by Bank of America Merrill Lynch in three series.
Bonds from the $4.3 million Series G mature from 2011 through 2020, with yields ranging from 0.82% with a 2.5% coupon in 2011 to 3.82% with a 4% coupon in 2020. These bonds are not callable.
Bonds from the $10.5 million Series H-1 mature from 2012 through 2015, with yields ranging from 1.20% with a 5% coupon in 2012 to 2.22% with a 5% coupon in 2015. These bonds are not callable.
Bonds from the $5.8 million Series I mature from 2011 through 2020, with a term bond in 2025. Yields range from 0.82% with a 3% coupon in 2011 to 4.75% with a 4.5% coupon in 2025. These bonds are callable at par in 2020.
The credit is rated Aa1 by Moody's and AA-plus by both Standard & Poor's and Fitch.
Morgan Keegan & Co. priced $151 million of airport revenue bonds for Alabama's Birmingham Airport Authority.
The bonds mature from 2011 through 2020, with term bonds in 2025, 2031, and 2040. Yields range from 1.57% with a 3% coupon in 2011 to 5.70% with a 5% coupon in 2040.
The bonds, which are callable at par in 2020, are insured by Assured Guaranty Municipal Corp., except for bonds maturing from 2011 through 2013, which are uninsured. The underlying credit is rated A3 by Moody's and A-minus by Fitch.
The economic calendar was light Wednesday.
Visible Supply
The Bond Buyer's 30-day visible supply fell $1.625 billion to $16.105 billion. The total is comprised of $2.281 billion of competitive bonds and $13.824 billion of negotiated bonds.
Previous Session's Activity
The Municipal Securities Rulemaking Board reported 40,822 trades of 15,246 issues for volume of $15.09 billion. Most active was taxable Chicago BABs 6.104s of 2028 that traded 329 times at a high of 104.125 and a low of 99.540.
