NEW YORK - The municipal market was weaker Wednesday amid light to moderate secondary trading activity as new issue took center stage, led by a Connecticut offering in excess of $700 million.
“We’re sort of picking up where we left off yesterday, though not quite to the same extent,” a trader in New York said. “We’re off maybe four or five basis points in 10 years, and perhaps two or three weaker further out. On the really short end, maybe one or two weaker.”
In the new-issue market Wednesday, Citi priced $736.6 million of taxable and tax-exempt debt for Connecticut, including $400.5 million of taxable Build America Bonds.
The Series B BABs mature from 2020 through 2023 and in 2030, and were priced to yield between 140 and 210 basis points over the corresponding Treasury yields. Yields were not available by press time. The BABs contain a make-whole call at Treasuries plus 30 basis points.
The $336.1 million tax-exempt component of the deal was priced in two series.
Bonds from the $199.5 million Series A mature from 2011 through 2019, with yields ranging from 0.71% with a 5% coupon in 2012 to 2.84% with a 5% coupon in 2019. Bonds maturing in 2011 were decided via sealed bid. These bonds are not callable.
Bonds from the $136.6 million Series C mature from 2012 through 2022, with yields ranging from 0.71% with a 2% coupon in 2012 to 3.33% with a 5% coupon in 2022. These bonds are callable at par in 2020.
The credit is rated Aa3 by Moody’s Investors Service and AA by both Standard & Poor’s and Fitch Ratings.
Municipal Market Data's triple-A scale yielded 2.55% in 10 years Wednesday, up seven basis points from Tuesday’s 2.48%, while the 20-year scale yielded 3.48%, up five basis points from Tuesday’s 3.43%. The scale for 30-year debt increased five basis points to 3.86% from 3.81% Tuesday.
“It’s just a weaker day, pretty much across the board,” a trader in Los Angeles said. “The focus, though, is on the primary.”
Tuesday’s triple-A muni scale in 10 years was at 93.7% of comparable Treasuries and 30-year munis were at 96.4%, according to MMD, while 30-year tax-exempt triple-A general obligation bonds were at 106.5% of the comparable London Interbank Offered Rate.
The Treasury market showed losses Wednesday. The benchmark 10-year note was quoted recently at 2.73% after opening at 2.64%. The 30-year bond was quoted recently at 4.06% after opening at 4.00%. The two-year note was quoted recently at 0.42% after opening at 0.40%.
Elsewhere in the new-issue market Wednesday, Bank of America Merrill Lynch priced $410 million of subordinate toll bridge revenue bonds for the Bay Area Toll Authority.
The bonds mature from 2019 through 2034, with term bonds in 2042 and 2050. Yields range from 2.99% with a 3.25% coupon in 2019 to 4.95% with a 5% coupon in 2050.
The bonds, which are callable at par in 2020, are rated A1 by Moody’s and A-plus by Standard & Poor’s.
Goldman, Sachs & Co. priced $1.1 billion of full faith and credit general obligation notes for Michigan.
The notes mature in Sept. 2011, yielding 0.45% with a 2% coupon.
The credit is rated MIG-1 by Moody’s and SP-1-plus by Standard & Poor’s.
The Virginia College Building Authority competitively sold $331.0 million of taxable and tax-exempt debt in several pieces.
A $105.1 million tax-exempt series was sold to Bank of America Merrill Lynch. These bonds mature from 2011 through 2027, with coupons ranging from 2% in 2011 to 3.5% in 2027. All the bonds were sold but not available. These bonds are callable at par in 2020.
A $225.9 million series was also sold to Bank of America Merrill Lynch, structured as both tax-exempts and taxable BABs.
Bonds maturing from 2011 through 2018 are tax-exempt, with coupons ranging from 2% in 2011 to 5% in 2018. All the bonds were sold but not available.
Bonds maturing from 2019 through 2025, with term bonds in 2030 and 2040, were structured as taxable BABs. Yields range from 3.75% in 2019, or 2.44% after the 35% federal subsidy, to 5.60% in 2040, or 3.64% after the subsidy, all priced at par. The bonds were priced to yield between 105 and 230 basis points over the corresponding Treasury yields.
The credit is rated Aa1 by Moody’s, AA by Standard & Poor’s, and AA-plus by Fitch.
In economic data released Wednesday, demand for durable goods climbed faster than economists estimated in September, increasing 3.3% largely due to aircraft and parts orders.
Excluding transportation, durable goods orders decreased 0.8% for the month. Transportation equipment jumped 15.7% as nonmilitary aircraft and parts, a volatile monthly figure, surged by $6.6 billion, or 105%.
Economists expected gains of 1.9% for all durable goods orders and 0.4% for orders excluding transportation.
New home sales rose 6.6% to a seasonally adjusted annual rate of 307,000 in September, the highest level since June.
It was the second consecutive monthly gain. Economists expected 300,000 new home sales for the month.
Visible Supply
The Bond Buyer's 30-day visible supply fell $2.866 billion to $14.613 billion. The total is comprised of $3.165 billion of competitive bonds and $11.448 billion of negotiated bonds.
Previous Session's Activity
The Municipal Securities Rulemaking Board reported 42,761 trades of 15,753 issues for volume of $10.96 billion. Most active was taxable Chicago Board of Education 6.319s of 2029 that traded 369 times at a high of 102.380 and a low of 98.875.
