NEW YORK — The uptick in new issuance continues to dominate the municipal market Thursday. Larger deals are coming to market, including on the competitive side, and are finding a willing audience.
But yields have given way a bit, traders have noticed. “The new issues are dominating the activity,” a trader in Texas said. “Activity levels seem to be decent. There’s still a little bit of sticker shock with pricing on the new deals. But there’s been a lot of price discovery this week, so the hunt for yield continues.”
Tax-exempt yields continue to weaken Thursday, backing away from record lows seen over the past several sessions, according to the Municipal Market Data scale. Maturities at the front end of the curve are flat to two basis points higher. Those four years and out are one to three basis points higher.
The 10-year yield Wednesday climbed two basis points from its record low, as measured by MMD, to 2.09%. The 30-year yield inched up to 3.67%, one basis point from its lowest level in at least three decades.
The two-year yield stayed at 0.30% for a 25th consecutive session, apparently content to linger at its lowest level in more than 40 years.
Treasury yields are weaker in the early afternoon. The 10-year benchmark yield has risen seven basis points to 2.07%.
The 30-year yield has increased five basis points to 3.33%. The two-year yield has inched up one basis point to 0.20%.
Volume in the primary is expected to rise from last week’s scant supply. Industry estimates place new issuance for this week at $4.65 billion, not including $5.4 billion of California revenue anticipation notes. Estimates for last week’s volume were revised downward to $1.95 billion.
In the negotiated market, Morgan Stanley priced $250 million of Long Island Power Authority electric system general revenue bonds. The bonds are rated A3 by Moody’s Investors Service, A-minus by Standard & Poor’s and A by Fitch Ratings.
Credits maturing in 2036 are wrapped by Assured Guaranty Municipal Corp. Yields range from 1.63% with a 5.00% coupon in 2016 to 4.85% with a 5% coupon in 2038.
The competitive market saw some relatively large deals. Bank of America Merrill Lynch won $211.2 million of Richland County, S.C., School District No. 1 general obligation refunding bonds. The bonds were rated Aa1 by Moody’s and AA by Standard & Poor’s.
Yields range from 0.43% with a 5.00% coupon in 2014 to 3.60% with a 4.00% coupon in 2027. Credits maturing in 2012, 2024, 2026, 2028, and 2029 were sold but not available.
Bank of America Merrill Lynch also won $148.4 million of Orange County Sanitation District, Calif., wastewater refunding revenue obligations. The bonds were rated triple-A by Standard & Poor’s and Fitch.
Yields range from 0.45% with a 4.00% coupon in 2014 to 3.25% priced at par in 2025. Debt maturing in 2012, 2013, 2016, 2017, and 2026 was sold but not available.
