NEW YORK — Investors with full pockets are diving head-first into the municipal market primary and secondary Tuesday, hungry for product.
Muni yields are falling steadily as a wave of new issuance reaches the market. Two of the week’s largest bond deals have seen bumps to prices and underwriters are pushing aggressive bids in the competitive space, muni pros say.
“The market is pretty hot right now,” a trader in New Jersey said. “People are grabbing bonds in here. We’re coming up on year end, and people will have a lot of money to reinvest with the January coupon. They feel pretty good about the muni market right now, and are not afraid to spend their money.”
Muni yields continue to dive deeper heading into Tuesday afternoon, according to the Municipal Market Data scale. They are steady at the two-year mark and flat to two basis points firmer through five years.
But, thereafter, they have fallen four to nine basis points. They continue to show their most dramatic descent in the belly of the curve, in the nine- to 15-year range, where they are down between six and nine basis points.
On Monday, the benchmark 10-year yield closed down one basis point to 2.17%. The two-year yield held steady at 0.39% for a third consecutive session. The 30-year yield dropped two basis points to 3.81%.
While muni yields tumble, those for Treasuries remain a bit weaker. The benchmark 10-year yield has risen three basis points to 2.07%.
The two-year yield is flat at 0.26%. The 30-year yield has climbed four basis points to 3.07%.
Primary market volume is expected to hover around the $6 billion range this week. Industry estimates for anticipated market volume total $5.82 billion, versus a revised $5.88 billion last week. No particularly large bond deals are expected.
In the negotiated market, Morgan Stanley led 20 other underwriters in a second-day retail order period for $550 million of New York City Transitional Finance Authority building aid revenue bonds. The bonds were rated Aa3 by Moody’s Investors Service and AA-minus by Standard & Poor’s and Fitch Ratings.
Yields range from 1.28% with coupons of 2.00% and 5.00% in a split maturity in 2015 to 4.53% with a 4.50% coupon in 2041. Debt maturing in 2013 was offered in a sealed bid. Credits maturing in 2024 through 2026 and in 2032, 2033, and 2037 were not offered for retail.
Yields at the 10-year and 30-year marks were one basis point and two basis points lower, respectively, from the first day of retail offering. They were unchanged through five years.
Institutional investors should be able to participate Wednesday at the latest. But there are rumblings that their opportunity could arrive sooner.
“They bumped in a few spots,” the New Jersey trader said. “And they’re probably going to accelerate the institutional order period into the afternoon, instead of waiting for tomorrow.”
JPMorgan priced for retail $159.4 million of Oklahoma Turnpike Authority system second senior revenue bonds. The bonds are rated Aa3 by Moody’s and AA-minus by Standard & Poor’s and Fitch.
Yields range from 0.76% with a 3.00% coupon in 2014 to 4.01% with a 4.00% coupon in 2031. Credits maturing in 2027, and split maturities in 2025, 2026, and 2028 through 2030 were not offered to retail.
In the competitive space, JPMorgan won $288.8 million of New York state series 2011E tax exempt general obligation bonds. The bonds are rated Aa2 by Moody’s and AA by Standard & Poor’s and Fitch.
Yields range from 0.42% with a 4.00% coupon in 2013 to 4.25% at par in 2041. Debt maturing in 2012 was not reoffered.
JPMorgan also won $138.3 million of Wisconsin general obligation bonds of 2011, series C. The bonds are rated Aa2 by Moody’s and AA by Standard & Poor’s and Fitch.
Yields range from 2.57% with a 5.00% coupon in 2023 to 4.05% with a 4.00% coupon in 2032.
