The municipal bond market opened much weaker Tuesday morning as yields followed Treasury yields higher, though the drop in prices didn't stop issuers from borrowing in the primary market.
"There are huge cuts," a New York trader said. "There are lots of bid lists out there for munis." The trader added munis followed Treasuries, which reacted to July retail sales.
Borrowers proceeded to tap the primary markets. Raymond James & Associates priced for retail $383.6 million of Reedy Creek, Fla., Improvement District ad valorem tax bonds, rated Aa3 by Moody's Investors Service, A-plus by Standard & Poor's, and AA-minus by Fitch Ratings. Institutional pricing is expected Wednesday.
Yields on the first series of $344.2 million ranged from 4.10% priced at par in 2026 to 5% priced at par in 2038. Bonds maturing between 2020 and 2025, in 2027, 2028, 2030, 2031, and in 2033 were not offered for retail. The bonds are callable at par in 2023.
Yields on the second series of $39.4 million of refunding bonds, ranged from 0.68% with a 3% coupon in 2015 to 3.74% with a 5% coupon in 2024. Bonds maturing in 2014 were offered via sealed bid. The bonds are callable at par in 2023.
M.R. Beal & Co. is expected to hold a second day of retail for $350 million Connecticut general obligation bonds. Institutional pricing is expected Wednesday. The bonds are rated Aa3 by Moody's and AA by Standard & Poor's, Fitch, and Kroll Bond Ratings.
In the first retail pricing Monday, the first series of $115 million of GO SIFMA index bonds were not offered.
Yields on the second series of $235 million of GOs ranged from 0.47% with a 4% coupon in 2015 to 4.50% with a 4.375% coupon in 2033. Bonds maturing in 2014, 2026, 2027, and between 2029 and 2032 were not offered for retail. The bonds are callable at par in 2023.
RBC Capital Markets is expected to price for institutions $193.6 million of JEA electric system bonds, following a retail order period Monday. RBC was able to halt orders on bonds maturing on the short end of the curve due to retail demand.
The first series of $32.7 million of revenue bonds is rated Aa2 by Moody's, AA-minus by Standard & Poor's, and AA by Fitch. Bonds were not offered for retail.
The second series of $160.9 million of subordinated revenue bonds is rated Aa3 by Moody's, A-plus by Standard & Poor's, and AA by Fitch.
Yields ranged from 0.68% with a 3% coupon in 2015 to 5% priced at par in 2035. Bonds maturing in 2014 were offered via sealed bid. The bonds are callable at par in 2018 except for those maturing in 2019.
Monday, yields on the Municipal Market Data scale ended steady after an unchanged session Friday. The 10-year yield closed unchanged at 2.72% for the third session and the 30-year was steady at 4.28% for the fifth session. The two-year finished flat at 0.43% for the 19th consecutive session.
Yields on the Municipal Market Advisors scale were mostly flat to one basis point higher on longer maturing bonds Monday. The 10-year yield fell one basis point to 2.89% while the 30-year yield increased one basis point to 4.34%. The two-year yield was unchanged at 0.54% for the fourth session.
Treasuries headed lower in price and higher in yield. The benchmark 10-year yield rose nine basis points to 2.70% and the 30-year yield increased seven basis points to 3.74%. The two-year yield rose two basis points to 0.33%.
In economic news, retail sales rose 0.2% to $424.5 billion in July after increased a revised 0.6% rise in June. July sales fell short of the 0.3% increase expected by economists.
"Core retail sales posted a fairly solid gain in July," wrote economists at RDQ Economics. "The retail sales data for July, combined with auto sales figures from vehicle manufacturers and our expectations for services spending, puts third-quarter real PCE on track for a gain of around 2.25% at this early stage in the quarter."