The tax-exempt market showed strength in the secondary market Thursday traders said both the belly and the long end of the curve had a stronger bias.
One trader located in the Southwest region said high-grade 10-year bonds traded through 2.00%.
“The market feels stronger,” a trader located in the Southwest region said. “We are seeing larger trades especially in high-grade. But it’s starting to trickle down to smaller deals.”
He added the market felt two to five basis points stronger in the belly of the curve. “The 10-year has been down so low for so long and those bonds are starting to trade well through 2.00% on triple-A bonds.”
This trader noted an $80 million Frisco, Texas, deal rated Aa1 by Moody’s Investors Service and AA by Standard & Poor’s came in at 2.02%. “It’s is starting to tighten up.”
Other traders noted the stronger bias shifted to the long end of the curve. “It’s stronger again, following Treasuries,” a New York trader said, adding the market was firmer by several basis points. “The back end looks the strongest.”
In the primary market Thursday, JPMorgan priced $500 million of Illinois State Toll Highway Authority senior revenue bonds, rated Aa3 by Moody’s and AA-minus by Standard & Poor’s and Fitch Ratings.
Yields ranged from 2.86% with a 5% coupon in 2027 to 3.53% with a 5% coupon in 2038. The bonds are callable at par in 2023.
RBC Capital Markets priced $372.4 million of Dallas-Fort Worth International Airport joint revenue improvement bonds subject to the alternative minimum tax, rated A1 by Moody’s and A-plus by Standard & Poor’s, and A by Fitch.
Yields ranged from 3.36% with a 5% coupon in 2026 to 4.26% with a 5% coupon in 2045. The bonds are callable at par in 2022 except bonds maturing in 2038, 2043, and 2045 which are callable at par in 2020. Yields were lowered five basis points in repricing on 2026, 2027, and 2028 maturities and lowered one basis point on 2038 maturity.
The Sacramento Municipal Utility District issued $308.8 million of electric revenue bonds in three pricings, rated A1 by Moody’s, AA-minus by Standard & Poor’s, and A-plus by Fitch.
Barclays priced $132.4 million. The bonds yielded 3.35% with a 5% coupon in 2037, 3.85% with a 3.75% coupon in 2038, and 3.43% with a 5% coupon in 2041. The bonds are callable at par in 2023.
Bank of America Merrill Lynch priced $118.6 million. Yields ranged from 0.77% with a 5% coupon in 2017 to 3.19% with a 5% coupon in 2033. The bonds are callable at par in 2023.
B of A Merrill also priced $57.8 million. Yields ranged from 0.47% with a 5% coupon in 204 to 0.92% with a 5% coupon in 2017.
In the competitive market, Wells Fargo won the bid for $183.1 million of Florida Department of Transportation turnpike revenue refunding bonds, rated Aa3 by Moody’s and AA-minus by Standard & Poor’s.
Yields ranged from 0.25% with a 5% coupon in 2014 to 2.29% with a 5% coupon in 2025. The bonds are callable at par in 2023.
In the secondary market, trades compiled by data provider Markit showed mostly firming.
Yields on Norfolk, Va., Economic Development Authority 5s of 2043 dropped three basis points to 3.49% and Tennessee’s Metropolitan Government of Nashville and Davidson County 5s of 2022 slid two basis points to 1.74%.
Yields on Waterford, Conn., 3s of 2029 and Wisconsin 5s of 2022 dropped two basis points each to 3.21% and 1.72%, respectively.
Yields on San Antonio electric and gas 5s of 2022 and Tampa-Hillsborough County, Fla., Expressway Authority 5s of 2042 also slid two basis points each to 1.69% and 3.57%, respectively. Yields on New York Municipal Water Finance Authority 5s of 2031 fell one basis point to 2.80%.
Municipal bond scales ended a few basis points firmer Thursday after a strong session Wednesday.
Yields on the Municipal Market Data triple-A GO scale ended as much as one basis point lower. The 30-year yield fell one basis point to 2.89%. The 10-year yield finished flat at 1.70% for the second session and the two-year closed steady at 0.29% for the 10th session.
Yields on the Municipal Market Advisors 5% coupon triple-A benchmark scale ended as much as two basis points lower. The 10-year and 30-year yields fell one basis point each to 1.76% and 3.02%, respectively. The two-year was flat at 0.32% for the 10th session.
Munis followed Treasuries higher. The benchmark 10-year and 30-year Treasury yields slid two basis points each to 1.69% and 2.87%, respectively. The two-year was steady at 0.23%.
In other bonds news, traders say President Obama’s proposed federal tobacco tax increase has not affected trading of tobacco bonds. “The news of the proposed tax increase on tobacco is a non-event at this time,” said analysts at Markit. “The tobacco market is a few basis points weaker but it does not seem to be in direct correlation to the tax proposal.”
The analyst added, “Investors seeking higher yields still have an appetite for tobacco bonds despite this recent news.”
Indeed, CUSIPs on Ohio’s Buckeye Tobacco Settlement Financing Authority, California’s Golden State Tobacco Securitization Corp., and New Jersey Tobacco Settlement Financing Corp. fell only one to two dollars in price over the course of April.
