NEW YORK — The municipal market is operating efficiently Wednesday, primary market deals are seeing strong interest and higher prices. And buying in the secondary continues to move yields, as well.
The market has a solid tone, a trader in California said. “There’s a much more positive attitude in the market that we’ve got right now,” he said. “As long as Treasuries don’t fall out of bed, we should be in good shape.”
Repeating a pattern from Tuesday, muni yield declines accelerated as the session wore on Wednesday, according to the Municipal Market Data scale. They have fallen one to three basis points through 2015. Beyond that stage, they are three to seven basis points firmer. The largest drop, five to seven basis points, falls in the six- to eight-year range.
The benchmark 10-year yield plunged 10 basis points Tuesday to 2.07%. This lowered its ratio to Treasuries to 99.51% from 106.37%, putting it below 100% for the first time since Aug. 24. It now sits close to the 2011 calendar-year average of 97.24%.
The two-year yield held steady at 0.39% for a fourth consecutive session. The 30-year yield dropped five basis points to 3.76%.
While muni yields face a downward pull, those for Treasuries remain mixed crossing noon. The benchmark 10-year yield has ticked down one basis point to 2.07%.
The two-year yield is steady at 0.26%. The 30-year yield has climbed two basis points to 3.10%.
Primary market volume is expected to weigh in around the $6 billion range this week. Industry estimates for anticipated market volume total $5.82 billion, against a revised $5.88 billion last week.
No particularly large bond deals are expected. Much of the week’s supply that has arrived has been absorbed into the marketplace, with little left over.
“The expectation is that we’re going to come to the year-end close in the primary market very soon; what you have now is probably what you’re going to have going into the new year,” the trader said. “If you like the market, you’re going to buy more, make sure you have your shelves stocked.”
In one of the largest bond deals of the week in the negotiated market, Barclays Capital Wednesday priced $443.8 million of Puerto Rico Public Finance Corporation 2011 series B commonwealth appropriation bonds. The bonds are rated Baa2 by Moody’s Investors Service and BBB-minus by Standard & Poor’s.
Yields range from 4.67% with a 6.00% coupon in 2024 to 5.50% priced at par in 2031.
Morgan Stanley priced $347.9 million of California Health Facilities Financing Authority series 2011D and California Statewide Communities Development Authority series 2011C revenue bonds. The bonds are rated Aa3 by Moody’s and AA-minus by Standard & Poor’s and Fitch Ratings.
Yields for the first series, $312 million of series 2011D bonds, range from 2.45% with a 5.00% coupon in a split maturity in 2018 to 5.00% priced at par in a split maturity in 2035. Credits maturing in split maturities in 2018 through 2023 and 2035, as well as in 2024 through 2026 and 2031, were not offered to retail.
Yields for the second series, $35.9 million of series 2011C bonds, ranged from 2.45% with a 3.00% coupon in 2018 to 4.64% with a 4.625% coupon in 2031.
