The tax-exempt market moved lower for the fourth session as traders said they were less willing to buy bonds at extremely high prices and sellers were forced to cut prices.
"It's a little weaker," a New York trader said. "It's a primary market because things are getting hung up in the secondary. We were bidding on a Rockland County bond and were 35 basis points behind where the guy wanted to sell. So things are getting hung up like that."
The trader added the stalemate will end eventually. "We think eventually that will cause munis to get cheaper. If it's the right bond in the primary it does well, but if you don't put it away you get pressure. These absolute yields are killing us."
In the primary market, Loop Capital Markets is expected to price for institutions $600.7 million of California State Public Works Board lease revenue and lease revenue refunding bonds, rated A2 by Moody's Investors Service and BBB-plus by Standard & Poor's and Fitch Ratings.
In retail pricing Wednesday, yields on the first series, $459.3 million of lease revenue bonds for various capital projects, ranged from 0.91% with a 4% coupon in 2015 to 3.63% with a 4% coupon in 2032. Bonds maturing between 2025 and 2031 and in 2037 were not offered for retail. The bonds are callable at par in 2022.
Yields on the second series, $53.6 million of lease revenue bonds for Riverside Campus projects, ranged from 1.14% with a 3% coupon in 2016 to 4.05% with a 4% coupon in 2037. The bonds are callable at par in 2022.
The third series, $67.2 million of lease revenue refunding bonds for the California State Prison in Lassen County, Susanville, were not offered for retail.
The fourth series, $20.6 million of lease revenue refunding bonds for the Richmond Laboratory project, yielded 0.75% with a 3% coupon in 2014 and 0.91% with a 4% coupon in 2015. Credits maturing in 2013 were not offered for retail.
Siebert Brandford Shank & Co. is expected to price $301.2 million of Dallas and Fort Worth International Airport joint revenue refunding bonds, rated A1 by Moody's and A-plus by Standard & Poor's and Fitch.
On Wednesday, the 10-year Municipal Market Data yield and the 30-year yield jumped three basis points each to 1.74% and 2.86%, respectively. The two-year was steady at 0.30% for the 16th consecutive trading session.
Treasuries were stronger Thursday after seeing losses Tuesday and Wednesday. The benchmark 10-year yield fell two basis points to 1.79% while the 30-year yield dropped three basis points to 2.96%. The 2-year was steady at 0.30%.
In economic news, initial jobless claims rose 46,000 to 388,000 for the week ended Oct. 13 after falling sharply the week before. Economists had predicted an increase of 26,000 claims to 365,000.
Continuing claims fell 29,000 to 3.252 million for the week ended Oct. 6.
"To judge the underlying level of jobless claims one has to remove seasonal influences and then try to extract the signal from the noise," wrote economists at RDQ Economics. "Both of these tasks are hazardous exercises on weekly economic data. For this reason, we focus on the four-week average of the seasonally adjusted claims data as a crude smoothing device. This approach shows that the underlying level of claims held steady at around 365,000 over the last two weeks despite gyrations in the weekly data due to the seasonal adjustment of California's claims numbers."
They added, "Based on claims, it would appear that job creation may have strengthened from the sluggish pace seen in August and September."
In similar economic news, the Philadelphia Fed Index registered a positive 5.7 in October versus a negative 1.9 in September Economists had expected a positive 1.0 reading for the index.
"Without focusing on any one report we can say that manufacturing conditions, which were deteriorating over the summer, appear to be trying to find their sea legs," RDQ economists wrote. "Industrial production rose in September and the regional Fed indexes for early October showed some improvement in general sentiment, but with mixed readings on the individual indexes on orders, shipments, employment, etc. This report from the Philly Fed is in this mixed category with a solid gain in headline sentiment and significantly less weak shipments but weaker readings on orders, employment, and expectations."