Market Post: Largest Muni Deals Price Before Fed Meeting

Traders eyed deals in the primary market Tuesday after several days of firmer trades in the secondary market. Activity is expected to be fairly active ahead of Wednesday's Federal Open Market Committee meeting announcement.

One of the largest deals of the week, nearly $500 million for New York's Empire State Development Corp., priced richer than Monday's Municipal Market Data scale on the short-term, but was cheaper on longer-maturing bonds.

"Deals are received fairly well. It seems like demand is high," a San Francisco trader said. "Taxes are only going to go up so munis should do well."

This trader said he is focused on the secondary market but cheap deals were hard to find. "I haven't seen anything I like. It seems like the same stuff we've been seeing. But for most people they will focus on the primary today."

Bank of America Merrill Lynch won the bid for $478.2 million of Empire State Development Corp. state personal income tax revenue bonds, rated AAA by Standard & Poor's and AA by Fitch Ratings.

Yields ranged from 0.30% with a 5% coupon in 2015 to 3.40% with a 5% coupon in 2025. The bonds are callable at par in 2023. Bonds with 5% coupons maturing in 2015 and 2016 were priced 13 and eight basis points richer than Monday's MMD scale. Bonds maturing in 2017 and 2018 were priced right on the scale. Bonds with 5% coupons maturing between 2019 and 2025 had spreads ranging from 13 basis points to 32 basis points cheaper than the MMD scale.

Also in the competitive market, Ohio is scheduled to auction $400 million of general obligation bonds in three pricings -$183.3 million, $116.7 million, and $100 million.

Virginia College Building Authority is expected to auction $332.7 million of revenue bonds, rated Aa1 by Moody's Investors Service and AA-plus by Standard & Poor's and Fitch.

In the negotiated market, the largest deals also priced. Bank of America Merrill Lynch held preliminary pricing for $287.3 million of Washington federal highway grant anticipation revenue bonds, rated Aa3 by Moody's and AA by Standard & Poor's.

Yields ranged from 0.58% with a 5% coupon in 2015 to 3.60% with a 4% and 5% coupon in a split 2024 maturity. The bonds are callable at par in 2023.

Ramirez & Co. held preliminary pricing for $253.8 million of Dallas-Fort Worth International Airport joint revenue refunding bonds, rated A2 by Moody's, A-plus by Standard & Poor's, and A by Fitch.

Yields ranged from 1.21% with a 3% coupon in 2016 to 4.94% with a 5.25% coupon in 2033. Bonds maturing in 2014 and 2015 were offered via sealed bid. The bonds are callable at par in 2023.

JPMorgan is expected to price for institutions $130 million of Colorado Springs, Colo., Utilities System improvement revenue bonds, rated Aa2 by Moody's and AA by Standard & Poor's and Fitch Ratings.

In retail pricing Monday, yields on the first series of $59.8 million ranged from 0.64% with a 3% coupon in 2015 to 4.63% with a 4.625% coupon in 2033. Bonds maturing in 2014 were offered via sealed bid. Portions of bonds maturing between 2025 and 2043 were not offered for retail. The bonds are callable at par in 2023.

Yields on the second series of $70.2 million ranged from 0.64% with a 3% coupon in 2015 to 3.50% with a 5% coupon in 2024. Bonds maturing in 2014 were offered via sealed bid. Bonds maturing between 2025 and 2043 were not offered for retail. The bonds are callable at par in 2023.

On Monday, yields on the triple-A Municipal Market Data scale ended as much as 10 basis points firmer. The 10-year yield slipped nine basis points to 2.74% and the 30-year yield dropped six basis points to 4.33%. The two-year was steady at 0.43% for the 43rd straight session.

Yields on the Municipal Market Advisors scale also ended as much as 10 basis points lower. The 10-year yield dropped nine basis points to 2.91% and the 30-year yield dropped seven basis points to 4.42%. The two-year closed unchanged at 0.55% for the 22nd session.

Treasuries were slightly stronger Tuesday morning for the fifth consecutive session. The benchmark 10-year yield slid two basis points to 2.86% and the 30-year yield fell one basis point to 3.86%. The two-year was steady at 0.40%.

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