NEW YORK – Like a runner on his or her last leg, the tax-exempt is struggling to finish a race. Municipals got slammed Wednesday morning after a small struggle Tuesday.
Most traders say yields will go up – it’s just a matter of time. And now seems to be the time.
“This market is going to take a big hit,” a New York trader said.
Munis were much weaker Wednesday morning, according to the Municipal Market Data scale. Yields inside three years rose one to three basis points while yields on the four year jumped five to seven basis points. Yields outside five years spiked between five and nine basis points.
On Tuesday, the two-year yield closed steady at 0.27% for its fourth consecutive trading session, remaining one basis point above its record low. The 10-year yield and 30-year yield each jumped two basis points to 2.04% and 3.31%.
Treasuries plummeted. The two-year yield jumped four basis points to 0.39%. The benchmark 10-year and the 30-year yields each rose 11 basis points to 2.24% and 3.37%.
In the primary market, Bank of America Merrill Lynch is expected to price for institutions $750 million of New York State Thruway Authority bonds, rated AA by Standard & Poor’s and Fitch Ratings, following a retail order period Tuesday.
Bank of America Merrill Lynch is expected to price for institutions $206 million of Dormitory Authority of the State of New York bonds for New York University, following a retail order period Tuesday. The credit is rated Aa3 by Moody’s Investors Service and AA-minus by Standard & Poor’s.
In the competitive market, Boston is expected to price nearly $238 million of general obligation bonds in three issues, rated Aaa by Moody’s and AA-plus by Standard & Poor’s.
Late Tuesday afternoon, Siebert Brandford Shank & Co. priced $343.4 million of District of Columbia Water and Sewer Authority revenue bonds, a day ahead of schedule. The credit is rated Aa3 by Moody’s, AA by Standard & Poor’s, and AA-minus by Fitch.
Yields on the first series, $178.7 million of public utility subordinate lien revenue bonds, ranged from 0.32% with 2% and 4% coupons in a split 2013 maturity to 3.62% with a 5% coupon in 2037. The bonds are callable at par in 2022.
Yields on the second series, $164.7 million of public utility subordinate lien revenue refunding bonds, ranged from 2.84% with a 4% coupon and 2.82% with a 5% coupon in a split 2024 maturity to 3.41% with a 5% coupon in 2033. The bonds are callable at par in 2022.
