Market Post: Buyers in Primary Limit Muni Losses

Tax-exempts outperformed Treasuries Wednesday morning as buyers in the new issue market helped slow the rise in yields.

After only several hours, there were $1.7 billion orders for $750 million Bay Area Toll Authority bonds. It is the largest deal expected this week.

"Munis seem weaker," a New York trader said. "They are following Treasuries but they are not down as much. There is good demand in the primary and that is holding up the market today."

Bank of America Merrill Lynch priced $750 million of Bay Area Toll Authority San Francisco Bay Area subordinate lien toll bridge revenue bonds, rated A1 by Moody's Investors Service and A-plus by Standard & Poor's.

Yields ranged from 4.36% with a 5% coupon in 2027 to 5.45% with a 5.25% coupon in 2053. The bonds are callable at par in 2023.

JPMorgan is expected to price for institutions $513 million New York City general obligation bonds in two pricings following a two-day retail order period. The bonds are rated Aa2 by Moody's and AA by Standard & Poor's and Fitch Ratings.

In retail pricing Tuesday, yields on $375 million ranged from 0.99% with a 3% coupon in 2016 to 4.77% with a 4.625% coupon in 2039. The bonds are callable at par in 2023. Bonds maturing in 2015 were offered via sealed bid. Bonds maturing in 2026, between 2031 and 2034, in 2036, and 2037 were not offered for retail. Yields were unchanged from Monday's retail order period.

Yields on $138 million ranged from 0.99% with 2% and 4% coupons in a split 2016 maturity to 2.72% with 4% and 5% coupons in a split 2021 maturity. Bonds maturing in 2014 were offered via sealed bid. Yields were unchanged from Monday's retail order period.

JPMorgan should price for institutions $164.3 million of Florida's Jacksonville Electric Authority water and sewer system revenue bonds following a retail order period Tuesday. The bonds are rated Aa2 by Moody's and AA by Standard & Poor's and Fitch.

Tuesday, the first series of $92.1 million were not offered for retail. Yields on the second series of $72.2 million ranged from 0.73% with a 3% coupon in 2015 to 4.38% with a 4.25% coupon in 2027. Bonds maturing in 2014 were offered via sealed bid. The bonds are callable at par in 2019.

In the competitive market, triple-A rated Maryland is scheduled to auction $435 million of general obligation bonds.

Connecticut is expected to auction $200 million of GOs, rated Aa3 by Moody's and AA by Standard & Poor's and Fitch.

Tuesday, yields on the Municipal Market Data scale ended as much as eight basis points weaker. The 10-year yield increased five basis points to 2.72% and the 30-year yield rose eight basis points to 4.23%. The two-year finished steady at 0.43% for the fifth consecutive session.

Yields on the Municipal Market Advisors scale ended as much as nine basis points higher. The 10-year yield increased five basis points to 2.90% and the 30-year yield rose nine basis points to 4.31%. The two-year was steady at 0.53% for the fifth session.

Treasuries were weaker again Wednesday. The benchmark 10-year yield rose seven basis points to 2.58% and the 30-year yield rose six basis points to 3.64%. The two-year yield rose four basis points to 0.35%.

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