Market Close: N.Y.'s MTA Kicks Off Primary In Weak Session

New York’s Metropolitan Transportation Authority tested demand in a softer tax-exempt market with the biggest deal to hit the primary so far this week.

JPMorgan launched the first major deal to price this week with $500 million of MTA transportation revenue bonds for retail investors. The bonds are rated A2 by Moody’s Investors Service and A by Standard & Poor’s and Fitch Ratings. Institutional pricing is expected Thursday.

Retail bought about $150 million of the deal, market participants said. “Demand within 15 years is kind of spotty but discount bonds in 2033 and 2043 are oversubscribed,” a New York trader said.

Yields ranged from 0.55% with 2% and 4% coupons in a split 2015 maturity to 4.20% with a 4% coupon in 2043. Bonds maturing in 2013 and 2014 were offered via sealed bid. The bonds are callable at par in 2023 except bonds maturing in 2023.

The MTA pricing came amid an overall weaker market. “Generally yields are higher by five to seven basis points,” a second New York trader said. “It’s not busier than yesterday, but we are starting to see guys pick their heads up a little toward the end of day.”

Other traders agreed the selloff wasn’t as bad as Tuesday. “There is a little bounce back today, but it’s still not great,” another New York trader said.

In other primary market news, a slew of triple-A rated deals priced, including the largest redemption of Build America Bonds to date.

Bank of America Merrill Lynch priced $360.3 million of Columbus, Ohio, tax refunding bonds.

Yields on the first series, $317 million of various purpose unlimited tax refunding bonds, ranged from 0.159% with a 4% coupon in 2014 to 3.05% with a 5% coupon in 2031. The bonds are callable at par in 2023.

Bonds with 5% coupons yielded nine basis points to 35 basis points above Tuesday’s Municipal Market Data scale.

Yields on the second series, $43.3 million of various purpose limited tax refunding bonds, ranged from 0.159% with a 4% coupon in 2014 to 3.50% with a 3.25% coupon in 2031. The bonds are callable at par in 2023.

Bonds with 5% coupons yielded 17 basis points to 39 basis points above the MMD scale.

B of A Merrill also priced $165.3 million of triple-A rated Loudoun County, Va., tax-exempt and taxable general obligation bonds.

Yields on the first series, $97.3 million of public improvement and refunding bonds, ranged from 0.28% with a 4% coupon in 2014 to 3.16% with a 4% coupon in 2032. Bonds maturing in 2013 were offered via sealed bid. The bonds are callable at par in 2022.

Bonds with 5% coupons yielded nine basis points to 25 basis points above the MMD scale.

The second series, $68 million of taxable GO refunding bonds, were priced at par with a 0.175% coupon in 2013 to a 2.513% coupon in 2021. Spreads ranged from 17 basis points to 60 basis points above the comparable Treasury yield.

Wells Fargo Securities won the bid for $151.1 million of triple-A rated Maricopa County Community College District GOs. Yields ranged from 0.35% with a 2% coupon in 2014 to 3.28% with a 3.5% coupon in 2027. The bonds are callable at par in 2023.

Also in the competitive market, the Los Angeles Community College District auctioned $305.7 million of GOs bonds, rated Aa1 by Moody’s and AA by Standard & Poor’s.

Bank of America Merrill Lynch won the bid for $250 million. Yields ranged from 0.13% with a 2% coupon in 2013 to 4.00% priced at par in 2037. The bonds are callable at par in 2023.

Citi won the bid for $55.7 million. Yields ranged from 0.15% with a 2% coupon in 2013 to 3.10% with a 3% coupon in 2027. The bonds are callable at par in 2023.

In other market news, Jefferies bought $31.2 million of Ramapo, N.Y., short-term bond anticipation notes Friday in a private placement, after the cancellation of a long-term competitive sale following an FBI raid on the town hall May 15. The notes yielded 3.5% with a 4.7% coupon in 2014 and are rated MIG-1 by Moody’s.

The bonds only traded three times Friday when a customer bought from a dealer institutional block sizes at 3.5%.

In the secondary market Wednesday, trades compiled by data provider Markit showed weakening.

Yields on Chicago Board of Education 6.138s of 2039 jumped eight basis points to 5.52% and Los Angeles Department of Water and Power 5s of 2028 rose five basis points to 2.96%.

Yields on New Jersey Tobacco Settlement Financing Corp. 5s of 2041 and Maine Municipal Bond Bank 5s of 2021 rose three basis points each to 5.75% and 2.13%, respectively.

Yields on Missouri Health and Educational Facilities Authority 4s of 2042 and Maryland State Health and Higher Educational Facilities Authority 4s of 2038 rose one basis point each to 4.15% and 4.24%, respectively.

Yields on the MMD scale ended Wednesday as much as eight basis points higher. The 10-year yield jumped eight basis points to 2.07% and the 30-year yield increased five basis points to 3.20%. The two-year finished flat at 0.29% for the fourth session.

Yields on the Municipal Market Advisors 5% scale ended as much as seven basis points higher. The 10-year yield jumped six basis points to 2.11% and the 30-year yield climbed five basis points to 3.31%. The two-year yield increased one basis point to 0.36%.

The Treasury yield curve flattened Wednesday. The two-year yield rose one basis point to 0.31%. The benchmark 10-year yield slid two basis points to 2.13% and the 30-year yield fell four basis points to 3.27%.

“The month of May is drawing down and it was not good for fixed income,” said Dan Toboja, vice president at Ziegler Capital Markets. “Munis and Treasuries are both off 30-plus basis points from the start of the month. There has not been a single day of a massive capitulation trade, but there has been a slow bleed higher in yields that continued even in the face of slight inflows and limited supply. The relatively solid technicals of munis even as the market has backed up helps explain the support bid we’ve had in the market that springs up after a trading session or two of weakness. As we head into the summer doldrums we expect volatility will not abate anytime soon.”

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