NEW YORK – Tax-exempt yields continued to rise across the curve Thursday, following Treasuries, as offerings were softened to get deals through.
“Blocks are trading, but it’s very targeted and very specific,” said a trader in Chicago. “Once you get into individual investors or privately managed accounts that have cash sitting around, they are hesitant to put money to work. And following that channel, traders are not interested in building a position.”
Muni yields were up in Thursday afternoon trading, according to the Municipal Market Data scale. On the short end of the curve, yields were up a basis point, while yields were up two basis points around the 2017 range. Credits maturing between 2018 and 2029 saw yields rise between one and three basis points, and yields in the 20-year range were up between two and four basis points. Credits maturing between 2034 and beyond saw yields jump between three and five basis points.
On Wednesday, the two-year muni yield closed at 0.45% for the tenth consecutive trading session. The 30-year was also unchanged at 3.72%. The 10-year saw a three basis point drop to close at 2.39%.
By Thursday afternoon, the Treasury sell-off was in full swing. Yields were up across the curve, seeing jumps of up to 11 basis points on the long end. The two-year yield was up one basis point at 0.31%, and the 10-year yield moved up 10 basis points to 2.31%. The 30-year spiked up 11 basis points to 3.34%.
“As treasuries extended losses, muni bids faded,” said MMD analyst Randy Smolik. “Still, sellers weren't giving paper away. Flexibility seemed modest to this point. Selected trades suggest a controlled drift.”
Bank of America Merrill Lynch priced $101.7 million of Oregon general obligation refunding bonds in three series. The bonds are rated Aa1 by Moody’s Investors Service and AA-plus by Standard & Poor’s and Fitch Ratings.
Yields on the first series, $60 million of Oregon opportunity bonds, ranged from 1.12% with a 3% coupon in 2015 to 2.87% with a 5% coupon in 2023. The bonds are callable at par in 2021.
Yields on the second series, $36.3 million of various project debt, ranged from 0.73% with a 2.5% coupon in 2014 to 3.63% with a 3.5% coupon in 2028. The bonds are callable at par in 2021.
And in the third series, $5.5 million of various project debt, yields ranged from 0.5% with a 2.5% coupon in 2013 to 3.63% with a 3.5% coupon in 2028. The credits are callable at par in 2021.
The Massachusetts School Building Authority was expected to come to market Thursday and pushed retail and institutional pricing up to Wednesday due to favorable market conditions, said Katherine Craven, MSBA Executive Director. The deal was also upsized to $1 billion from $600 million.
“It’s also important to note we had $2.58 billion in orders on an $800 million deal. That’s a critical component on why we decided to upsize,” Craven said. Craven added the deal was a great value for taxpayers of Massachusetts as they got an all-in true interest cost of 4.24%
“We were very satisfied and pleased to see the reception our bonds got in the market,” Craven said. “We were more aggressive Wednesday when we saw opportunities in the market.”
Because of the added interest in the deal, 2022, 2023, and 2027 maturities were added. Spreads were also tightened between two and 11 basis points in repricing throughout the deal.
Barclays Capital priced the senior dedicated sales tax bonds, rated Aa1 by Moody’s and AA-plus by Standard & Poor’s and Fitch.
Yields ranged from 0.55% with a 2% coupon in 2013 to 4.20% with a 5% coupon in 2041. Credits maturing in 2012 were offered via sealed bid. The bonds are callable at par in 2021.
