Market Post: Dealers Keep Inventory Light as New Deals Price

Participants in the tax-exempt market continued to hold cash Tuesday as little trading activity surfaced.

Traders said some large institutional players sold bonds in the secondary to free up cash for new deals in the primary, while others weren't participating at all.

"There was a fair amount of bids-wanted today but not a lot of it traded," a Chicago trader said. "We have the smallest position in two years. Funds aren't participating. We are trying to find some crossover buyers but that's a challenge. There is nothing driving the market."

This trader said any activity continues to be focused on the short-end of the curve. "I will buy something at the right price but I'm not paying up for it. There continues to be front-end inquiry."

Tax-exempts traded flat, he added.

In the primary market, the week's largest deals priced. Citi held preliminary pricing for the largest deal of the week, $1.1 billion of Ohio Turnpike and Infrastructure Commission revenue bonds.

The first series of $73.7 million is rated Aa3 by Moody's Investors Service, AA-minus by Standard & Poor's, and AA by Fitch Ratings. The bonds yield 4.85% with a 5% coupon in 2048. The bonds are callable at par in 2023.

The second series of $714.1 million is rated A1 by Moody's and A-plus by Standard & Poor's Fitch. Yields ranged from 2.19% with a 5% coupon in 2019 to 5.11% with a 5% coupon in 2048. The bonds are callable at par in 2023.

The third series of $145 million of capital appreciation bonds is rated A1 by Moody's and A-plus by Standard & Poor's and Fitch. Yields ranged from 6.10% with a 2036 maturity to 6.26% and 6.71% in a split 2043 maturity. Portions of bonds maturing between 2037 and 2043 are callable at par in 2023.

The fourth series of $145 million of convertible capital appreciation bonds is rated A1 by Moody's and A-plus by Standard & Poor's and Fitch. The bonds yielded 5.70% in 2034, 5.75% in 2035, and 5.80% in 2036. The bonds are callable at par in 2031.

JPMorgan priced $277.2 million of New York City general obligation bonds, rated Aa2 by Moody's and AA by Standard & Poor's and Fitch.

Yields on the first series of $265.7 million ranged from 0.97% with a 5% coupon in 2016 to 3.35% with a 5% coupon in 2024. Bonds maturing in 2015 were offered via sealed bid. The bonds are callable at par in 2023.

Yields on the second series of $11.5 million ranged from 0.97% with a 3% coupon in 2016 to 3.35% with a 5% coupon in 2024. Bonds maturing in 2014 and 2015 were offered via sealed bid. The bonds are callable at par in 2023.

Barclays priced and repriced $207.7 million of Georgia Private Colleges and Universities Authority revenue bonds for Emory University. The bonds are rated Aa2 by Moody's, AA by Standard & Poor's, and AA-plus by Fitch.

Yields ranged from 0.25% with a 3% coupon in 2014 to 4.59% with a 5% coupon in 2043. The bonds are callable at par in 2023. Yields were lowered as much as nine basis points in repricing.

Barclays priced $124.4 million of Orange County Transportation Authority senior lien toll road revenue refunding bonds, rated A1 by Moody's, A by Standard & Poor's, and A-minus by Fitch.

Yields ranged from 0.78% with a 4% coupon in 2015 to 4.68% with a 5% and 4.5% coupon in a split 2030 maturity. Bonds maturing in 2014 were offered via sealed bid. The bonds are callable at par in 2023.

Bank of America Merrill Lynch accelerated institutional pricing of $115.6 million of Wisconsin Health and Educational Facilities Authority revenue bonds for Aurora Health Care, rated A3 by Moody's and A by Fitch.

The bonds yield 5.25% with a 5.125% coupon in 2031 and 5.42% with a 5.375% coupon in 2035. The bonds are callable at par in 2023. Yields were unchanged from retail pricing Tuesday morning.

Monday, yields on the Municipal Market Data scale ended as much as one basis point lower. The 10-year yield slipped one basis point to 2.69%. The 30-year was steady at 4.21% for the second session and the two-year finished flat at 0.43% for the ninth consecutive session.

Yields on the Municipal Market Advisors scale also ended as much as one basis point lower. The 10-year and 30-year yields were steady at 2.89% and 4.29%, respectively. The two-year was steady at 0.54% for the fourth session.

After posting small gains in the morning, Treasuries traded weaker Tuesday afternoon. The benchmark 10-year yield rose two basis points to 2.61% and the 30-year yield increased one basis point to 3.67%. The two-year was steady at 0.33%.

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