The tax-exempt market kept its focus on the primary market this week as traders said a wide bid-ask spread in the secondary led to a stalemate, forcing action in the primary market where better deals can be found.
“This week has been focused on new deals and they are getting very good reception,” an Atlanta trader said. “Most maturities are oversubscribed and not just one or two times, but five or six times oversubscribed. And that creates repricing at lower yields. So there is still a lot of cash out there.”
Because of that, the secondary market has been quiet. “The secondary has been slow but any nice quality blocks are getting very good bids. Munis have really outperformed Treasuries this week.”
Other traders noted secondary activity was slow because of the difference between low bids and high ask prices. “It’s a little weaker,” a New York trader said. “It’s a primary market because things are getting hung up in the secondary. We were bidding on a Rockland County bond and were 35 basis points behind where the guy wanted to sell. So things are getting hung up like that.”
The trader added the stalemate will end eventually. “We think eventually that will cause munis to get cheaper. If it’s the right bond in the primary it does well, but if you don’t put it away you get pressure. These absolute yields are killing us.”
In the primary market, Loop Capital Markets priced for institutions $600.7 million of California State Public Works Board lease revenue and lease revenue refunding bonds, rated A2 by Moody’s Investors Service and BBB-plus by Standard & Poor’s and Fitch Ratings.
Yields on the first series, $459.3 million of lease revenue bonds for various capital projects, ranged from 0.89% with a 4% coupon in 2015 to 4.00% with a 5% coupon in 2037. The bonds are callable at par in 2022. Yields were lowered one and two basis points from retail pricing.
Yields on the second series, $53.6 million of lease revenue bonds for Riverside Campus projects, ranged from 1.13% with a 3% coupon in 2016 to 4.10% with a 4% coupon in 2037. The bonds are callable at par in 2022. Yields were lowered one and two basis points on the short end from retail pricing and increased as much as six basis points outside of 2023 maturities.
Yields on the third series, $67.2 million of lease revenue refunding bonds for the California State Prison in Lassen County, Susanville, ranged from 0.87% with a 5% coupon in 2015 to 1.62% with a 5% coupon in 2018.
The fourth series, $20.6 million of lease revenue refunding bonds for the Richmond Laboratory project, yielded 0.75% with a 3% coupon in 2014 and 0.89% with a 4% coupon in 2015. Credits maturing in 2013 were offered via sealed bid. Yields were lowered two basis points on the 2015 maturity from retail pricing.
Siebert Brandford Shank & Co. priced $294.5 million of Dallas-Fort Worth International Airport joint revenue refunding bonds, rated A1 by Moody’s and A-plus by Standard & Poor’s and Fitch.
Yields ranged from 0.33% with a 2% coupon in 2013 to 3.40% with a 5% coupon in 2035. The bonds are callable at par in 2022.
On Thursday, the Municipal Market Data scaled ended steady. The 10-year yield and the 30-year yield closed flat at 1.74% and 2.86%, respectively. The two-year was steady at 0.30% for the 17th consecutive trading session.
Treasuries weakened as the risk-on trade dominated markets. The benchmark 10-year yield and the 30-year yield jumped three basis points each to 1.84% and 3.02%, respectively. The two-year was steady at 0.30%.