NEW YORK — A couple of large new deals out of New York and low activity in the secondary characterize the municipal market Monday afternoon.
Retail interest in the $752.41 million of New York City general obligation bonds that Siebert Brandford Shank & Co. priced has been underwhelming, a trader in New Jersey said. Yields have been raised five basis points in a repricing, and may have to be raised again, he speculated.
Secondary trading is pretty slow; the Municipal Market Data will likely base its read on the day’s new issues, the trader added. And if investors had money to put to work anywhere, they’d probably be in the five- to 10-year range, mostly out of a need for safety, he said.
“We’ve been under-reacting both on the downside of Treasuries and the upside of Treasuries,” he said. “Today we have an up-sharply market in Treasuries, and muni yields are not up much at all.”
Tax-exempt yields are mostly weaker by the early afternoon, according to the Municipal Market Data scale. Yields in 2013 are steady. Beyond that, yields are flat to three basis points higher.
The 10-year muni yield held at 1.97%. For the week, it dropped 16 basis points.
The 30-year yield also held at 3.44% on the day. It plunged 26 basis points last week. The two-year yield remained at 0.32% for a seventh straight session.
Treasury yields have picked up where they left off last week: they continue to weaken across the curve. To put the rate increases into perspective, though, they follow some incredible rallying at the intermediate and longer parts of the curve the past couple of sessions last week.
The benchmark 10-year Treasury yield has jumped seven basis points by noon to a still-low 1.90%.
The 30-year yield, which at one point last week plunged 53 basis points, has climbed eight basis points to 2.98%. The two-year yield has increased two basis points to 0.24%.
The market expects a slight decrease in new supply for this week, after a substantial increase in issuance last week. This week, the market expects an estimated $6.83 billion in new supply. Last week saw a revised $7.86 billion of volume.
At these rates, tax-exempts are attractively priced when compared to alternative taxable fixed income investments in general and taxable munis, specifically, JPMorgan Fixed Income analyst Peter DeGroot wrote in a recent research report. “We expect [this] week will see a healthy bid from crossover investors interested in relative price gains, high taxable equivalent yields, and finding high-quality longer duration assets,” he wrote.
In the negotiated market, Siebert Brandford priced and repriced for retail $752.41 million of New York City GO bonds in three series. The institutional order period is expected Tuesday, following this the second day of retail sales. The bonds are rated Aa2 by Moody’s Investors Service and AA by Standard & Poor’s and Fitch Ratings.
Yields rose five basis points across the curve at repricing, with the first series, $584.8 million of Series D GOs, yielding from 1.47% with coupons of 4.00% and 5.00% in a split maturity in 2017 to 3.95% with a 3.875% coupon in 2037. Credits maturing between 2024 and 2031 are not offered for retail.
Yields for the second series, $30 million of Series E, mature in 2023 and aren’t offered for retail. Yields for the third series, $137.6 million of Series H GOs, ranged from 0.37% with a 3.00% coupon in 2013 to 2.23% with coupons of 3.50%, 4.00%, and 5.00% in multiple maturities in 2020. Yields were raised five basis points, to these levels, for the five- and nine-year credits at repricing.
Morgan Stanley priced $122. 8 million of Connecticut Development Authority pollution control revenue refunding bonds for the Connecticut Light And Power Company project. The bonds were rated A2 by Moody’s and A-minus by Standard & Poor’s and Fitch. The bonds were priced at par to yield 4.25% in 2028.
