Underwriters were able to lower yields on cheap deals priced Tuesday as the short end of the curve showed the most strength.
While the primary market stole most of the focus, the Detroit bankruptcy and the Chicago three-notch downgrade to A3 Friday were also on the minds of traders.
One analyst at Markit said Chicago bonds were 10 to 15 basis points cheaper since the downgrade. "Long paper has been getting crushed," he said.
A Chicago trader said bonds could be as much as 60 basis points cheaper since the downgrade.
"The Chicago market is off," a second Chicago-based trader agreed. "I would say closer to 60 basis points. Some of it is getting lumped into Detroit too and that conversation is pushing all retail interest out. And institutions have been out for a while so there are not a lot of buyers." He added most of the selloff is coming on the long-end of the curve.
Back in the general market, this trader said it felt five to six basis points weaker. "Demand is off from last week. Some people are waiting for Aug. 1 money but it's slower." Most of the weakness was on bonds maturing beyond 10 years.
In the primary market Tuesday, JPMorgan held a second retail order period for $513 million New York City general obligation bonds in two pricings. The bonds are rated Aa2 by Moody's Investors Service and AA by Standard & Poor's and Fitch Ratings.
Yields on the first pricing of $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 the second pricing of $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.
Barclays repriced $300 million of District of Columbia Water and Sewer Authority public utility subordinate lien revenue bonds, rated Aa3 by Moody's, AA by Standard & Poor's, and AA-minus by Fitch.
The bonds yielded 4.85% with a 4.75% coupon in 2041, 4.89% with a 5% coupon in 2044, and 5.04% with a 5% coupon in 2048. The bonds are callable at par in 2023. Yields were lowered one basis point from preliminary pricing.
Bank of America Merrill Lynch repriced $197.2 million of Kansas City, Mo., general improvement airport refunding revenue bonds, rated A2 by Moody's and A-plus by Standard & Poor's.
Yields on the first series of $145 million, subject to the alternative minimum tax, ranged from 0.70% with a 2% coupon in 2013 to 4.60% with a 5.25% coupon in 2027. The bonds are callable at par in 2021. Yields were lowered as much as 10 basis points on bonds maturing between 2014 and 2020.
Yields on the second series of $52.1 million ranged from 0.75% with a 4% coupon in 2015 to 2.35% with a 5% coupon in 2019. Yields were lowered as much as 12 basis points from preliminary pricing.
Traders said there were $200 million of orders for the second series. "It's a blowout," the New York trader said. "They are cheap. The 2019 maturity is 80 basis points off the triple-A scale and 28 basis points off the single-A scale."
JPMorgan priced for retail $164.3 million of Florida's Jacksonville Electric Authority water and sewer system revenue bonds, rated Aa2 by Moody's and AA by Standard & Poor's and Fitch.
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.
Monday, yields on the Municipal Market Data scale were mostly steady to one basis point weaker. The 30-year yield rose one basis point to 4.15%. The 10-year was flat at 2.67% for the second session and the two-year finished steady at 0.43% for the fourth consecutive session.
Yields on the Municipal Market Advisors scale also ended steady to weaker Monday. The 10-year and 30-year yields rose one basis point each to 2.85% and 4.22%, respectively. The two-year was steady at 0.53% for the fourth session.
Treasuries pared some of the morning losses but still traded weaker than Monday. The benchmark 10-year yield rose two basis points to 2.51% and the 30-year yield increased three basis points to 3.58%. The two-year yield rose one basis point to 0.31%.