The tax-exempt market weakened on Thursday morning, playing catch up to the Treasury selloff Wednesday afternoon after the release of the Federal Open Market Committee meeting minutes.
Municipal bond traders said the $1.78 billion Jefferson County, Ala., sewer revenue warrants priced on Tuesday were floating around in the secondary market while a double-B-plus rated hospital credit was priced cheap, pushing all muni prices lower.
"Everything is getting cheaper in sympathy," a Chicago trader said, adding the high-grade market was four to five basis points weaker. High-yield munis were weaker.
Traders said Citi was left with $200 million in inventory of the JeffCo bonds, but other high-yield credits were well received. The $172 million Guam Waterworks Authority deal priced Wednesday and was 15 times oversubscribed. The bonds are rated Ba1 by Moody's Investors Service, A-minus by Standard & Poor's, and BB by Fitch Ratings.
In the primary, Wells Fargo priced for institutions $1.5 billion Port Authority of New York and New Jersey bonds, following a retail order period Wednesday. The bonds are rated Aa3 by Moody's and AA-minus by Standard & Poor's and Fitch.
Yields on the first series of $473.6 million of bonds subject to the alternative minimum tax, ranged from 0.51% with a 4% coupon in 2015 to 5.12% with a 5% coupon in 2043. The bonds are callable at par in 2023. Yields were raised one to three basis points on selective maturities between 2023 and 2038.
Yields on the second series of $917.3 million ranged from 0.41% with a 4% coupon in 2015 to 4.62% with a 5% coupon in 2043. The bonds are callable at par in 2023. Yields were lowered one basis point each from retail pricing on bonds maturing in 2015 and 2016 but raised one to two basis points on bonds maturing between 2022 and 2029.
Yields on the third series of $109.2 million ranged from 0.32% with a 3% coupon in 2015 to 2.49% with a 5% coupon in 2021.
Wells Fargo is expected to price for institutions $380 million of Los Angeles Department of Water and Power system revenue bonds, rated Aa2 by Moody's and AA by Standard & Poor's and Fitch.
In the retail order period on Wednesday, yields ranged from 0.69% with a 5% coupon in 2017 to 4.20% with a 5% coupon in 2035. The bonds are callable at par in 2023. Bonds maturing between 2017 and 2024 were priced four to 20 basis points richer than Tuesday's double-A MMD scale. Bonds maturing between 2025 and 2035 yielded two to nine basis points above the scale.
On Wednesday, the triple-A Municipal Market Data scale ended as much as three basis points weaker, reversing a four-day positive streak. The 10-year yield rose one basis point to 2.62% and the 30-year yield climbed three basis points to 4.12%. The two-year closed unchanged for the fifth session at 0.33%.
Yields on the Municipal Market Advisors benchmark scale ended as much as four basis points higher after posting mostly gains for five sessions. The 10-year yield rose one basis point to 2.69% and the 30-year yield climbed three basis points to 4.33%. The two-year was steady for the third session at 0.38%.
Treasuries were mostly steady on Thursday morning after a big selloff Wednesday following the release of the Federal Open Market Committee meeting minutes. The two-year and 30-year yields were unchanged at 0.28% and 3.91%, respectively. The benchmark 10-year yield rose one basis point to 2.81%.
