With a risk on trade pushing the Dow Jones Industrial Average to its third straight record high Thursday, municipal bond yields followed Treasuries higher.
And while the tax-exempt market was pushed lower by Treasuries, traders said the market was focused on the primary, particularly the New York State deal. “The New York State deal is going off and that’s what people are looking at,” a New York trader said.
“As far as I can tell it went alright,” a second New York trader said. “There are still balances left but that’s just because it was a lot of bonds. The tone on the street is there was active trading today.”
New York State auctioned $570.2 million of GOs in three pieces, rated Aa2 by Moody’s Investors Service, AA by Standard & Poor’s and AA by Fitch Ratings.
JPMorgan won the bid for $348.1 million of tax-exempt GOs. Yields ranged from 0.20% with a 2% coupon in 2014 to 3.65% with a 3.5% coupon in 2043. The bonds are callable at par in 2023.
Morgan Stanley won the bid for $174.1 million of tax-exempts. Yields ranged from 0.19% with a 5% coupon in 2013 to 3.23% with a 3.125% coupon in 2032.
Bank of America Merrill Lynch bought $48 million of taxable GOs. The bonds were priced at par to yield from 0.29% in 2014 to 2.45% in 2023.
Outside that deal, the market was still weaker, following Treasuries, traders said.
“The market is squishy, especially on the long end,” a Chicago trader said. “It’s selling off but the problem is finding firm, deep bid sides. If you put an offer out on $3 million of bonds and you see a bid for $400 million, it’s hard to gauge how dramatic the sell-off really is. Bid sides are light in size and it feels like dealers are not as eager. So it’s hard to determine where the bottom is. No one is really stepping up.”
The remainder of the primary deals priced Thursday. JPMorgan priced $356.9 million of Maryland Health and Higher Education Facilities Authority bonds for the University of Maryland Medical System, rated A2 by Moody’s, A-minus by Standard & Poor’s, and A by Fitch. The bonds include $241.8 million of tax-exempt revenue bonds and $115 million of taxable bonds.
Yields on the tax-exempt portion of $241.8 million ranged from 0.23% with a 2.00% coupon in 2013 to 4.09% with a 4.00% coupon and 3.85% with a 5% coupons in a split 2043 maturity.
The taxable portion of $115.1 million was priced at par with a 3.991% coupon in 2028, 4.665% coupon in 2036, and 4.815% coupon in 2043. Spreads ranged from 145 basis points to 200 basis points above the comparable Treasury.
JPMorgan also priced $206.4 million of University of Massachusetts Building Authority project revenue bonds, rated Aa2 by Moody’s, AA-minus by Standard & Poor’s, and AA by Fitch.
Yields ranged from 0.28% with a 2% coupon in 2014 to 3.75% with a 4% coupon in 2043. The bonds are callable at par in 2022.
In the secondary market, trades compiled by data provider Markit showed mostly weakening.
Yields on San Antonio water revenue 5s of 2026 jumped six basis points to 2.47% while JobsOhio Beverage System 5s of 2038 increased four basis points to 3.49%.
Yields on New Jersey 5s of 202 and Wichita Falls, Texas, 3s of 2024 rose two basis points each to 1.62% and 3.00%, respectively.
Still, other trades were stronger. Yields on another JobsOhio Beverage System 4.532s of 2035 dropped four basis points to 4.35% while Dormitory Authority of the State of New York 5s of 2039 fell one basis point to 2.37%.
Overall, municipal bond market scales ended weaker Thursday for the fourth straight session.
Yields on the Municipal Market Data triple-A GO scale ended as much as four basis points higher. The 10-year yield jumped four basis points to 1.94% while the 30-year yield increased two basis points to 3.02%. The two-year closed at 0.31% for the 13th straight session.
Yields on the Municipal Market Advisors 5% coupon triple-A benchmark scale closed as much as four basis points higher. The 10-year yield jumped three basis points to 1.93% while the 30-year yield increased two basis points to 3.08%. The two-year was steady at 0.33% for the eighth session.
Treasuries continued their week-long selloff as stocks soared to record highs. The Dow Jones Industrial Average closed at its third straight record high Thursday at 14,329, up 0.23% or 33.25 points. The S&P 500 index climbed 2.80 points, or 0.18%, to 1,544. The Nasdaq climbed 9.72 points, or 0.30%, to 3,232.
In comparison, the benchmark 10-year Treasury yield jumped five basis points to 1.99% while the 30-year yield spiked up five basis points to 3.20%. The two-year was steady at 0.26%.
Thursday’s risk on trade was buoyed by better than expected jobless claims released Thursday morning. Seasonally adjusted initial jobless claims fell 7,000 to 340,000 for the week ending March 2, falling below the 355,000 expected by economists.
“Although we await the new seasonal adjustment factors for 2013, which will be important to see if the claims picture survives this revision, the decline in the four-week average of claims below the 350,000 mark is an encouraging sign for job growth and the economy,” RDQ economists wrote. “We maintain that the problem with job creation is not the level of layoffs but the reluctance of companies to hire new employees.”