NEW YORK — Extremely light retail participation and large gains in tax-exempts characterize the municipal market around lunchtime.
Munis appear to be outperforming Treasuries. But retail investors, still concerned with the trials and tribulations in other areas of the financial markets, are looking the other way, a trader in California said.
“We’re still seeing relatively slow retail velocity,” he said. “Retail is somewhat preoccupied with what’s going on in the stock market as well as with the economy and credit, in general. It’s certainly not reflective of what’s going on in Treasuries.”
There are some high-grade bonds seeing some stability in the marketplace, he added.
Municipal bond yields are between three and 11 basis points lower crossing noon, according to Municipal Market Data. Munis in 2012 are steady.
Tax-exempts maturing between 2013 and 2014 are three to seven basis points lower, yields from 2015 to 2020 are eight to 10 basis points lower, and yields beyond 2021 are eight to 11 basis points lower.
Treasuries have also seen gains. The benchmark 10-year Treasury yield is 13 basis points lower at 2.14%, and the two-year yield is three basis points lower at 0.18%. The 30-year yield is 11 basis points lower at 3.54%. Entering the afternoon, prices have stabilized somewhat after experiencing volatility this morning.
Tuesday’s session ended with the 10-year muni yield at 2.38%, its lowest yield in almost 10 months. The two-year muni yielded 0.35%, its lowest yield since Aug. 31, 2010.
The 30-year muni yielded 3.92%, its lowest since early November.
Retail investors, though, aren’t participating in either muni or Treasury gains, the trader said.
“We’re seeing bumps on MMD scales,” he said. “However, if you try to put a retail bid list out for the bid with a broker, the bid side is very sketchy, if non-existent.”
Muni market participants note that extremely light supply has been a significant reason for plunging muni yields. This week, the industry predicts that municipal bonds sold will total $2.25 billion versus a revised $3.24 billion last week.
In the largest deals on the day on the negotiated side, Citi priced for retail $310.1 million of Los Angeles Department of Water and Power water system revenue bonds. The bonds are rated Aa2 by Moody’s Investors Service, AA by Standard & Poor’s, and AA-plus by Fitch Ratings.
Yields range from 1.55% with a 4.00% coupon in 2017 to 4.25% with a 5.00% coupon in 2036. Debt maturing in 2041 was not offered to retail.
Also, Barclays Capital priced and then repriced $211.5 million of Private Colleges and Universities Authority Emory University revenue bonds. The bonds were rated Aa2 by Moody’s and AA by Standard & Poor’s.
After repricing, which firmed yields by seven basis points, yields range from 1.08% with a 3.00% coupon in 2016 to 4.23% with a 5.00% coupon in 2041.
“From the new issue side, it seems like the negotiated stuff is priced very cheap and has not caught up to the price action in the secondary yet,” a trader in Florida said.
Ramirez & Co. priced for institutions $225 million of Puerto Rico Public Buildings Authority government facilities revenue bonds, Series S. The bonds are rated Baa1 by Moody’s, BBB by Standard & Poor’s, and BBB-plus by Fitch.
Yields range from 4.75% with a 5.75% coupon in 2022 to 6.00% at par in 2041. Since repricing for institutions, yields have risen by around 10 basis points on medium- and long-term credits.
The stock market indexes are all down at least 2.57% on the day, reversing Tuesday’s reversals. The Dow Jones Industrial average, currently down by almost 3.00%, has dropped more than 334 points.
