NEW YORK – The tax-exempt market continued to firm for the third session this week even as Treasuries pared morning gains.
Munis continue to strengthen even after setting record low yields as recorded by the Municipal Market Data scale earlier this week.
“We are continuing to firm up today,” a Los Angeles trader said. “Rates are more and more unbelievable but overall, it seems like there is good demand on new issues we are bringing today.”
In particular, he said a few California deals he looked at were very well received.
Munis were stronger Wednesday afternoon following a firmer market Monday and Tuesday, according to the Municipal Market Data scale. Yields inside four years were steady while five- to eight-year yields fell up to two basis points. Nine- to 12-year yields fell the most, dropping between one and three basis points. Outside 13 years, yields fell as much as two basis points.
On Tuesday, the two-year yield closed flat at 0.31% for the 15th consecutive trading session. The 10-year yield and the 30-year yield each plummeted four basis points to 1.76% and 3.09%.
The 10-year hasn’t hit 1.76% since Feb. 3 when it yielded 1.77%. It remains eight basis points above its record low of 1.68% set Jan. 31. The 30-year beat its previous record low of 3.13% set Monday which beat the prior record of 3.14% last hit on Feb. 2.
Treasuries pared most of the gains made Wednesday morning but were still steady to stronger from Tuesday levels. The benchmark 10-year yield fell one basis point to 1.83% while the 30-year yield was steady at 3.04%. The two-year rose one basis point to 0.27%.
In the primary market, Morgan Stanley priced $408.5 million of California Health Facilities Financing Authority Stanford Hospital and Clinics revenue bonds, rated Aa3 by Moody’s Investors Service and AA-minus by Standard & Poor’s and Fitch Ratings.
Bonds on the first series, $340 million, yielded 3.44% with a 5% coupon in 2032, 3.84% with a 5% coupon in 2042, and 4.06% with a 5% coupon in 2051. The bonds are callable at par in 2022.
Yields on the second series, $68.5 million, ranged from 0.58% with 2% and 3% coupons in a split 2014 maturity to 2.62% with a 5% coupon in 2023. Credits maturing in 2013 were offered via sealed bid. The bonds are callable at par in 2022.
Bank of America Merrill Lynch priced $155.1 million of Carolinas Healthcare System bonds for the Charlotte-Mecklenburg Hospital Authority, rated Aa3 by Moody’s and AA-minus by Standard & Poor’s.
Yields ranged from 0.39% with a 2% coupon in 2014 to 3.76% with a 5% coupon in 2043. The bonds are callable at par in 2022.
In the secondary market, trades reported by the Municipal Securities Rulemaking Board showed firming over the course of the last week.
Bonds from an interdealer trade of California 4.375s of 2042 yielded 4.24%, five basis points lower than where they traded Tuesday.
A dealer bought from a customer Illinois Development Finance Authority 0s of 2025 at 2.98%, two basis points lower than where they traded Friday.
Bonds from an interdealer trade of Illinois 4s of 2030 yielded 4.10%, one basis point lower than where they traded Monday.
Bonds from an interdealer trade of Hawaii 5s of 2021 yielded 1.72%, one basis point lower than where they traded a week ago.
