NEW YORK — The new primary municipal bond deals showed solid demand for value Wednesday.
The practice of making concessions on some high-grade issues Tuesday to move product followed through in Wednesday’s session. Some issues required some cheapening for the institutional pricing period, a trader in New Jersey said.
“Absolute yields are so low that buyers are resistant to paying them, so spreads have to give to some extent,” he said. “And we saw a little bit of that today. But there’s still fairly good demand.”
Tax-exempt yields, after holding steady for three days, mostly weakened Wednesday, according to the Municipal Market Data scale. The very front end of the curve held steady. Maturities three years and out were one to two basis points higher.
“Munis have held in the last couple of days relative to Treasuries,” a trader in California said. “There’s a bit of capitulation on that today, where we see the long end off a couple of basis points.”
The 10-year yield climbed two basis points from its record low, as measured by MMD, to 2.09%.
The 30-year yield inched up a basis point to 3.67%, one basis point from its lowest level in at least three decades. The two-year yield stayed at 0.30% for a 25th consecutive session, apparently content to linger at its lowest level in more than 40 years.
Treasury yields had been weaker for most of the session, but fell in the afternoon to end the day mostly firmer. The 10-year benchmark yield ticked up one basis point to 2.00%. Though higher, it’s still near a range it hasn’t seen in roughly five decades.
The 30-year yield fell five basis points to 3.28%. The two-year yield declined two basis points to 0.19%.
Volume in the primary is expected to rise from last week’s scant supply. Industry estimates place new issuance for this week at $4.65 billion, not including $5.4 billion of California revenue anticipation notes. Estimates for last week’s volume were revised downward to $1.95 billion.
In the negotiated market Wednesday, Barclays Capital priced $430.5 million of California State University Trustees system-wide revenue bonds.
The bonds are rated Aa2 by Moody’s Investors Service and A-plus by Standard & Poor’s.
Yields range from 0.32% with a 2.00% coupon in 2012 to 4.60% with a 5.00% coupon in 2042. There were no more offers taken for credits maturing from 2012 through 2019, as well as for one half of split maturities in 2020, 2021, 2022, 2027, and 2031. At repricing, 10-year yields were five basis points lower.
Citi priced $395 million of Dormitory Authority of the State of New York North Shore-Long Island Jewish obligated group revenue bonds. The bonds are rated A3 by Moody’s and A-minus by Standard & Poor’s and Fitch.
Yields ranged from 1.30% with a 3.00% coupon in 2013 to 5.125% priced at par in 2041. Credits maturing in 2012 were offered in a sealed bid.
JPMorgan priced $325 million of Sacramento Municipal Utility District electric revenue refunding bonds. The bonds are rated A1 by Moody’s and A-plus by Standard & Poor’s and Fitch.
Yields ranged from 0.55% with a 3.00% coupon in 2013 to 3.98% with a 5.00% coupon in 2028. Debt maturing in 2012 was offered in a sealed bid.
Also, JPMorgan priced $150 million of Indiana Finance Authority lease appropriation bonds in two series. The bonds were rated Aa2 by Moody’s and AA-plus by Standard & Poor’s and Fitch Ratings.
Credits for the $70 million first series were priced to the SIFMA Swap index plus 49 basis points in 2035. Credits for the $80 million second series were also priced to the SIFMA Swap index plus 49 basis points in 2035.
Wells Fargo Securities priced $5.4 billion of California revenue anticipation notes in two series. The notes were rated MIG 1 by Moody’s, SP-1-plus by Standard and Poor’s and F1 by Fitch.
Yields for the first series, $4.9 billion, stood at 0.40% with a 2.00% coupon. Yields for the second series, $500 million, settled at 0.38 % with a 2.00% coupon.
The deal did well in both the retail and institutional order periods, said the New Jersey trader, whose firm was involved in the pricing.
“That deal was extremely well received,” he said. “It did well in the retail period. And it cleaned up really well with oversubscription in the institu period, where they combined the secondary retail and shortened it and went into institutional today. They were able to lower the yields by two basis points. To me, that’s a very good indication of what demand is like.”
