Municipal bond traders focused their attention on the week's hefty new issue calendar, which kicked off on Tuesday with the sale of several big-ticket items.
"It seems to me that the demand is still there in the primary market," said a trader in Virginia.
He said, however, that the large demand seen earlier in the year for high-quality tax-exempts was "waning a little" as some investors go hunting for a bit more yield. "Deals that offer a little bit of spread over the triple-A curve are doing pretty well."
Tuesday's deals "were being priced to move," said a New York trader. "There is ample customer interest for the most part."
J.P. Morgan Securities is the winner of the competitive sale of Washington Suburban Sanitary District, Md.'s $250 million unlimited tax general obligation consolidated public improvement bonds. The bonds were priced as serials to yield from 0.12% with a 2.00% coupon in 2015 to 3.59% with a 4.00% coupon in 2044.
The issue is of the highest credit quality, carrying ratings of triple-A from Moody's Investors Service, Standard & Poor's and Fitch Ratings.
Also in the primary, JPMorgan priced the Arizona Transportation Board's $346.075 million revenue bonds. The bonds were priced as serials to yield from 0.93% with a 5.00% coupon in 2018 to 2.57% with a 5.00% coupon in 2025; the 2015 and 2016 maturities were offered as sealed bids. The issue is rated Aa1 by Moody's and AA-plus by S&P.
In other activity, RBC Capital Markets priced $364.955 million Houston Independent School District, Texas, limited tax refunding bonds. The bonds were priced as serials to yield from 0.30% with a 5.00% coupon in 2016 to 3.26% with a 4.00% coupon in 2033.The bonds are backed by Texas' Permanent School Fund and rated triple-A by Moody's and S&P's. Moody's underlying rating is triple-A while S&P's is AA-plus.
Also on Tuesday, Baltimore was holding a retail order period for its $409.83 million water and wastewater revenue bonds in a new-money and refunding deal. The bonds will be priced for institutions by Wells Fargo Securities on Wednesday. The senior lien series is rated Aa2 by Moody's and AA by S&P's, while the subordinate lien series is rated Aa3 by Moody's and AA-minus by S&P's.
Tuesday's Trading
Municipal bond prices slipped slightly Tuesday, continuing the market sell-off that began last week.
Municipal bonds' yields rose, with the benchmark 10-year triple-A GO and the 30-year GO both up by one basis point to 2.20% and 3.10%, respectively, according to the final read of Municipal Market Data's triple-A scale.
"The market's still a bit slippery," said a trader in Texas. "But it's got some tone to it."
He added that some November coupon money was still being put to work and that traders were looking forward to the December reinvestment cash.
But some traders said trading was subdued on the day.
"It's kind of quiet," the Virginia trader said.
The trader in New York concurred. "The secondary market is definitely taking a back seat to the primary." He added that the market, though "seems to be in pretty good shape."
On Monday, muni yields rose with yields on bonds maturing from seven to eight years increasing by one basis point, according to MMD. Yields increased by two basis points for the nine to 10 year maturities, and by one basis point for bonds maturing from 11 to 12 years and 20 to 30 years. The rest of the curve held steady.
Treasuries were mixed on Tuesday with the two-year note's yield unchanged at 0.52% from Monday's market close. The 10-year gained three basis points to 2.33% and the 30-year increased by six basis points to 3.05%, respectively.
Looking Ahead
Municipal bond investors still await the week's largest sale - Connecticut's $550 million GO offering. The bonds will be priced in three series on Thursday by JPMorgan Securities.
The $240 million Series F green bonds will mature from 2015 to 2034, while the $60 million Series G portion will mature from 2028 to 2031, and Series H, which totals $250 million, will mature from 2016 to 2026. The bonds are rated AA3 by Moody's and AA by both Standard & Poor's and Fitch.
"In early October MMD found that Connecticut had the eighth highest spread among issuers tracked by MMD," according to Senior MMD Analyst Daniel Berger. "Since then spreads have increased slightly and in the 10-year range this spread is +30 basis points. For example on Friday there were $1 million+ 5s of 3/2032 (c24) that traded at 3.02% (+30.5 basis points.) We can expect similar levels this week."
LPL Becomes Preferred Retail Muni Dealer for J.P. Morgan
LPL Financial is becoming a preferred retail dealer of new-issue municipal bonds for J.P. Morgan Chase & Co.
Under an agreement announced on Tuesday, new issue munis will be available to LPL's financial advisor clients through J.P. Morgan's proprietary platform.
"LPL Financial will now be able to offer the more than 17,500 financial advisors served by LPL access to the new issue municipal bond market from J.P. Morgan," Mike Haire, LPL Vice President of Fixed Income Trading, said in a press release.
New municipal bond orders will be treated on par with J.P. Morgan and other orders submitted to the underwriting syndicate.
"Partnering with LPL will enable us to offer our municipal issuer clients access to an expansive network of financial advisors and investors," Paul Palmeri, Head of Public Finance for J.P. Morgan, said in a release.
