NEW YORK - The municipal market was again weaker Wednesday amid light to moderate secondary trading ahead of Thursday’s market closure in observance of Veterans Day.
Traders said tax-exempt yields were higher by one to three basis points inside of 10 years, and increased five to seven basis points further out.
“We’re sort of picking up where we left off yesterday on the long end, though the losses aren’t quite as steep,” a trader in New York said.
“There isn’t a ton of liquidity out there right now, especially ahead of tomorrow’s holiday,” a second New York trader added.
In the new-issue market Wednesday, Barclays Capital priced $647.6 million of tax-exempt and taxable debt for the Santa Clara Valley Transportation Authority, including $470.7 million of taxable Build America Bonds.
The BABs mature from 2021 through 2023 with a term bond in 2032. Yields range from 4.649% in 2021, or 3.02% after the 35% federal subsidy, to 5.876% in 2032, or 3.82% after the subsidy.
The bonds were priced to yield between 160 and 240 basis points over the 10- and 30-year Treasury yields.
Bonds from the $176.8 million tax-exempt series mature from 2014 through 2020, with yields ranging from 1.10% with a 4% coupon in 2014 to 2.88% with a 5% coupon in 2020. These bonds are not callable.
The credit is rated Aa2 by Moody’s Investors Service and AA-plus by Standard & Poor’s.
Municipal Market Data's triple-A scale yielded 2.62% in 10 years Wednesday, seven basis points higher than Tuesday’s 2.55%, while the 20-year scale yielded 3.73%, seven basis points more than Tuesday’s 3.66%. The scale for 30-year debt climbed seven basis points to 4.17% Wednesday from 4.10% Tuesday.
“We’ve seen continued weakness today, and it will probably carry a bit into Friday and next week,” a trader in Los Angeles said. “There’s probably not going to be much happening Friday with the holiday tomorrow; people will be treating it at something of a four-day weekend. But I wouldn’t be surprised to see yields widen a bit more.”
Wednesday’s triple-A muni scale in 10 years was at 98.5% of comparable Treasuries and 30-year munis were at 98.1%, according to MMD, while 30-year tax-exempt triple-A general obligation bonds were at 107.5% of the comparable London Interbank Offered Rate.
The Treasury market was mixed Wednesday. The benchmark 10-year note was quoted recently at 2.66% after opening at 2.70%. The 30-year bond was quoted recently at 4.25% after opening at 4.24%. The two-year note was quoted recently at 0.44% after also opening at 0.44%.
The Treasury Department Wednesday auctioned $16 billion of 30-year bonds with a 4 1/4% coupon at a 4.320% high yield, a price of 98.83. The bid-to-cover ratio was 2.31. The Federal Reserve banks also bought $429.0 million for their own account in exchange for maturing securities.
Elsewhere in the new-issue market Wednesday, Morgan Stanley priced $157.6 million of revenue bonds for Texas’ Tarrant County Cultural Education Facilities Finance Corp.
The bonds mature in 2037 and 2040, yielding 5.15% and 5.25% respectively, both with 5% coupons.
The bonds, which are callable at par in 2020, are rated Aa3 by Moody’s and AA-minus by Standard & Poor’s.
Goldman, Sachs & Co. priced $145.4 million of taxable debt for Gainesville, Fla., including $132.4 million of taxable BABs.
The BABs mature in 2040, yielding 6.024% priced at par, or 3.92% after the 35% federal subsidy.
The bonds were priced to yield 175 basis points over the 30-year Treasury yield and contain a make-whole call at Treasuries plus 30 basis points.
Bonds from the $12.9 million taxable series mature in 2030, yielding 5.874% priced at par.
The bonds were priced to yield 160 basis points over the 30-year Treasury yield and contain a make-whole call at Treasuries plus 25 basis points.
The credit is rated Aa2 by Moody’s and AA by both Standard & Poor’s and Fitch.
In economic data released Wednesday, initial jobless claims decreased 24,000 to 435,000 on a seasonally adjusted basis for the week ended Nov. 6, more than cancelling out the upwardly revised 22,000 increase reported the previous week.
Continuing claims for the week ended Oct. 30 dropped to 4.301 million, the third decline in four weeks and the lowest level since roughly the height of the financial crisis - the week of Nov. 22, 2008.
Economists polled by Thomson Reuters expected 450,000 initial claims and 4.500 million continuing claims, according to the median estimates.
Import prices jumped 0.9% in October, as both fuel and non-fuel imports rose, the Labor Department reported Wednesday morning. However, the rise was just shy of economists' expectations.
Overall export prices increased 0.8% in October, the third consecutive monthly increase, led by a 2.5% jump in agricultural export prices.
Import prices excluding fuel increased 0.3% and prices excluding petroleum increased 0.4%. It was the largest increase in import prices excluding petroleum since May.
Fuel import prices, which dropped 1.7% in September, jumped 3.0% in October, led by increased imports of crude and petroleum product prices. It was the largest increase since January's 4.4% jump in fuel imports.
But economists expected overall import prices would rise 1.2%, according to the median estimate from Thomson Reuters.
Visible Supply
The Bond Buyer's 30-day visible supply fell $4.160 billion to $13.343 billion. The total is comprised of $4.245 billion of competitive bonds and $9.098 billion of negotiated bonds.
Previous Session's Activity
The Municipal Securities Rulemaking Board reported 44,694 trades of 16,279 issues for volume of $11.88 billion. Most active was taxable Rosemont, Ill., 6.75s of 2035 that traded 265 times at a high of 100.300 and a low of 97.292.
