NEW YORK – The tax-exempt market is mixed as munis try to follow Treasuries higher, but are being held back by heavy new issuance.
“There are a ton of issues out there that we have to figure out,” said a trader in Chicago. “It’s hard to see that it’s getting better because deals are mixed.”
He added munis are “trading off of what’s going on overseas but we’re trying to get huge issues done and there are cheap prices, but some are running around in the secondary. So, it’s like a mixed green salad.”
A trader in New York said there are a lot of bid-wanteds out there that are “keeping people busy. There is so much new issue to digest.”
Munis were firming in early Thursday afternoon trading, according to the Municipal Market Data scale. Yields on the three- and four-year maturities fell up to three basis points. The belly of the curve saw the biggest rally, with yields falling up to four basis points. The 10-year yield dropped up to three basis points. Beyond 2023, yields fell around two basis points.
On Wednesday, munis ended flat, putting the 10-year and 30-year at 2.33% and 3.81%, respectively. The two-year closed flat for its 11th consecutive trading day at 0.42%.
Treasuries were mixed with the front end weakening and the long-end firming. The two-year was up two basis points to 0.28%. But the benchmark 10-year fell two basis points, dropping below 2% for the first time in a week. The 30-year fell four basis points to 3.00%.
In the primary market, Bank of America Merrill Lynch priced for institutional investors $1.3 billion of Hawaii general obligation bonds, following a two-day retail order period. Pricing was not available by press time.
Barclays Capital priced for institutional investors $787.6 million of Minnesota Tobacco Securitization Authority tobacco settlement revenue bonds following Wednesday’s retail order period. Pricing was not available by press time.
In the competitive market, triple-A rated Westchester County, N.Y., auctioned $200 million of general obligation bonds in three pricings.
JPMorgan won the bid for $145.84 million. Pricing was not available by press time.
Citi won the remaining $29.9 million and $24.26 million deals.
Yields on the $29.9 million of bonds ranged from 0.55% with a 4% coupon in 2014 to 3.60% with a 3.5% coupon in 2031. Credits maturing in 2012, 2013, 2020 to 2023, and 2025 were not reoffered. The debt is callable at par in 2021.
Bonds on the $24.3 million of federally taxable securities yielded 1.15% with a 1.3% coupon in 2016. The bonds were priced to yield 75 basis points over the comparable three-year note.
