The tax-exempt market ended on a mostly steady note Wednesday as traders turned their attention to the primary market, allowing activity in the secondary to take a rest.
Though some traders worried about how the market could handle the increase in issuance, there were few signs of weakness.
“The market is just primarily focused on new issuance this week which started coming to the table this morning,” a New York trader said. “So that’s where the focus is. The market ended last week on a good tone and Treasuries are somewhat better today. So with the lack of recent supply and the reinvestment money, initially deals should be pretty well received.”
Still, he added if there is paper floating around near the end of the week, the market may have to back up.
And while the focus has been on the primary market, this trader said the secondary market was showing strength in the morning session around the five-year spot.
Other traders agreed the market was stronger. “Deals seem like they are aggressively priced across the board,” a Chicago trader said. “The market is not really showing any signs of weakness with this supply.”
He added that trading further down on the credit scale is still focused on quality paper. “Some large blocks of long clean health care are going away this morning,” the trader said. “There is not much in lower-rated to speak of yet.”
In the primary market, Bank of America Merrill Lynch priced $2 billion of tax-exempt New Jersey Economic Development Authority school facilities construction refunding bonds, rated A1 by Moody’s Investors Service and A-plus by Standard & Poor’s and Fitch Ratings.
Yields on the first series of $1.63 billion, ranged from 1.27% with a 2% coupon in 2018 to 2.99% with a 5% coupon in 2031. The bonds are callable at par in 2023.
Bond in the second series, $380.5 million of SIFMA index notes, were priced at par, 125 basis points above the SIFMA index in 2025, 155 basis points above the SIFMA index in 2027, and 160 basis points above the SIFMA index in 2028. The bonds are callable at par in 2023 except bonds maturing in September 2025 which are callable at par in March 2025.
B of A Merrill also priced $245.4 million of federally taxable bonds for the Authority. The bonds were priced at par with a 0.857% coupon in 2015 to 1.648% coupon in 2018. Spreads ranged from 60 basis points to 90 basis points above the comparable Treasury yield.
JPMorgan priced $301.4 million of Houston Independent School District limited tax refunding bonds.
The first series, $204.2 million of limited tax schoolhouse and refunding bonds are triple-A rated backed by the Permanent School Fund guarantee program. Yields ranged from 0.16% with a 2.5% coupon in 2014 to 3.02% with a 4% coupon in 2038. The bonds are callable at par in 2023.
The second series, $97.2 million of limited tax refunding bonds are rated Aaa by Moody’s and AA-plus by Standard & Poor’s and are not backed by the Permanent School Fund. Yields ranged from 0.17% with a 2.5% coupon in 2014 to 2.79% with a 4% coupon in 2032. The bonds are callable at par in 2023.
In the competitive market, Washington State sold $1.38 billion of various purpose general obligation bonds in four pricings, rated Aa1 by Moody’s and AA-plus by Standard & Poor’s and Fitch.
JPMorgan won the bid for the first pricing of $666.7 million. Yields ranged from 0.17% with a 2% coupon in 2013 to 3.05% with a 3% coupon in 2031. The bonds are callable at par in 2023.
Citi won the bid for the second pricing, $323.5 million. Yields ranged from 0.189% with a 5% coupon in 2014 to 3.25% with a 4% coupon in 2043. The bonds are callable at par in 2023.
B of A Merrill won the bid for the third pricing, $230.6 million. Yields ranged from 0.20% with a 2% coupon in 2014 to 3.10% with a 4% coupon in 2038. The bonds are callable at par in 2023.
RBC Capital Markets won the bid for the fourth pricing, $159.4 million. Yields ranged from 0.98% with a 5% coupon in 2018 to 3.04% with a 3% coupon in 2031. The bonds are callable at par in 2023.
Wells Fargo Securities won the bid for $350 million of Port Authority of New York and New Jersey consolidated bonds, rated Aa3 by Moody’s and AA-minus by Standard & Poor’s and Fitch.
Yields ranged from 0.68% with a 4% coupon in 2015 to 3.80% with a 4% coupon in 2043. Bonds maturing in 2014 were offered via sealed bid. The bonds are callable at par in 2023.
In the secondary market, trades compiled by data provider Markit showed a mix of strengthening and weakening.
Yields on Phoenix, Ariz., 5s of 2018 fell three basis points to 0.86% while Indiana State Finance Authority 5s of 2042 slipped one basis point to 3.56%.
Yields on New York’s Triborough Bridge and Tunnel Authority 5s of 2026 and Oklahoma State Municipal Power Authority 4s of 2038 dropped two basis points each to 2.47% and 3.64%, respectively.
Other trades were weaker. Yields on Tennessee 3.728s of 2024 jumped three basis points to 2.51% while Puerto Rico Commonwealth 5s of 2029 increased two basis points to 5.07%. Yields on Port Authority of New York and New Jersey 3s of 2028 rose one basis point to 2.81%.
The Municipal Market Data scale ended mostly steady Wednesday after closing flat on Tuesday. The 10-year and 30-year yields finished steady for the fourth session at 1.67% and 2.72%, respectively. The two-year finished steady at 0.33% for the fifth session.
After firming throughout the day, Treasuries ended steady to slightly weaker Wednesday. The two-year and benchmark 10-year yields ended flat at 0.25% and 1.84%, respectively. The 30-year yield increased one basis point to 3.03%.