The tax-exempt market stood on firmer footing Tuesday though traders cautioned they weren't eager to buy bonds as many headwinds still face the market.
"The market seems to feel better," a Texas trader said. "But what's disconcerting is $21 billion exiting muni-only funds. It's controlled selling. And retail is still a net seller at least on the fund side."
This trader added that retail is still not participating in the market. "Individual retail buyers in the 25 to 50 bonds have been absent for a while. I'm sure it's the stock market and Detroit and headline events and it feels like death by 1,000 cuts."
In the primary market Tuesday, Texas successfully auctioned $7.2 billion of tax and revenue anticipation notes, rated MIG-1 by Moody's Investors Service and F-1-plus by Fitch Ratings.
JPMorgan won $4.8 billion of the TRANs in three series, including $2.5 billion which yielded 0.203% with a 2% coupon, $2.05 billion which yielded 0.205% with a 2% coupon, and $250 million which yielded 0.196% with a 2% coupon.
Wells Fargo Securities won the bid for $1 billion, including $400 million which yielded 0.197% with a 2% coupon, $300 million which yielded 0.192% with a 2% coupon, $200 million which yielded 0.187% with a 2% coupon, and $100 million which yielded 0.182% with a 2% coupon.
Morgan Stanley won the bid for $500 million which yielded 0.196% with a 2% coupon.
Goldman, Sachs & Co. won the bid for $375 million, including $200 million which yielded 0.204% with a 2% coupon, $100 million which yielded 0.20% with a 2% coupon, and $75 million which yielded 0.204% with a 2% coupon.
Bank of America Merrill Lynch won the bid for $260 million, including $150 million which yielded 0.20% with a 2% coupon and $110 million which yielded 0.19% with a 2% coupon.
RBC Capital Markets won the bid for $215 million which yielded 0.184% with a 2% coupon.
Citi won the bid for $50 million which yielded 0.196% with a 2% coupon.
"Historically Texas comes and goes," the Texas trader said. "There is always such big demand for it. Sometimes it hangs around but usually someone stocks some bonds and within a week it's gone."
Generally speaking, this trader said there is so much cash on the sidelines that high-quality, short-term paper is very expensive. "For quality paper it's impossible to buy anything with a reasonable spread on it. It's crazy high levels."
In other big primary deals, California auctioned $764.1 million of general obligation bonds in two pricings, $249.2 million and $514.9 million, rated A1 by Moody's and A by Standard & Poor's and Fitch.
JPMorgan won the bid for $514.9 million. Citi won the bid for $249.2 million. Details were not available by press time.
In the negotiated market, some of the week largest deals also priced.
Wells Fargo priced $220.7 million of Maine Municipal Bond Bank taxable liquor operation revenue bonds, rated A1 by Moody's and A-plus by Standard & Poor's. The bonds were priced at par to yield from 1.068% in 2015 to 4.352% in 2024. Spreads ranged from 70 basis points to 160 basis points over the comparable Treasury yield.
Goldman, Sachs & Co. held preliminary pricing for $179.9 million of Atlanta water and wastewater revenue refunding bonds, rated Aa3 by Moody's and A-plus by Standard & Poor's and Fitch. Yields ranged from 0.59% with a 5% coupon in 2015 to 4.75% with a 4.5% coupon and 4.64% with a 5.25% coupon in a split 2029 maturity. The bonds are callable at par in 2023.
Monday, yields on the triple-A Municipal Market Data scale ended as much as one basis point firmer. The 30-year yield fell one basis point to 4.45%. The two-year finished flat at 0.43% for the 29th straight session and the 10-year was steady at 2.96% for the second session.
Yields on the Municipal Market Advisors scale ended flat across the curve Monday. The 10-year was steady at 3.10% for the second session and the 30-year was flat at 4.55% for the third session. The two-year was flat at 0.55% for the eighth session.
Treasuries continued to strengthen Tuesday afternoon. The benchmark 10-year and 30-year yields slid four basis points each to 2.75% and 3.73%, respectively. The two-year yield fell one basis point to 0.37%.
