NEW YORK – The tax-exempt market is holding steady as fears over Greece subside and investors cautiously sell Treasuries.
“I think the muni market is taking a breather from yesterday’s activity,” a trader in Florida said. “The aggressiveness we saw yesterday was being pulled along with Treasuries and now Treasuries are taking a breather so guys are on the sidelines.”
The trader added there was decent business inside 10-years on big names, but early weakness on the backend, which is stabilizing now.
In the competitive market “everything was on the light side so there was nothing we could glean leadership from,” the trader said. On the negotiated side, it was “the same type of story” as market participants waited to see the allotments from yesterday’s Connecticut general obligation deal and the New York Liberty Development Corp. deal. “That will set the tone going out today,” the trader said.
In Wednesday afternoon trading, muni yields were mostly steady with a one to two point increase on the long end of the curve, according to the Municipal Market Data scale. Yields on credits maturing between 2018 and 2034 rose one basis point while yields on credits maturing after 2035 rose up to two basis points.
On Tuesday, the two-year closed at 0.42% and the 30-year was at 3.65%. The benchmark 10-year muni yield closed at 2.28%.
Wednesday afternoon, Treasuries prices rose slightly, paring back a sell-off that started Wednesday morning. The two-year yield was down a basis point to 0.23% after holding steady Wednesday morning. The 10-year yield was up six basis points in afternoon trading to 2.02%, giving back gains from Wednesday morning when it was down 11 basis points. The 30-year yield was up nine basis points to 3.06%, slightly less than the 13 basis points the yield was up this morning.
“Now that Treasuries were drifting, the tone to the tax-exempt sector feels a little soft,” said MMD analyst Randy Smolik. “Without competitive high-grade sales to provide focus, customer attention shifts to the negotiated sector.”
In the negotiated market, Morgan Keegan priced $184.4 million of Virginia Resources Authority bonds in two series.
Yields on the first series, $129 million of infrastructure revenue bonds, ranged from 0.49% with a 3% coupon in 2013 to 3.78% with a 5% coupon in 2041. Credits maturing in 2012 were offered via sealed bid. The bonds are callable at par in 2021. They are rated Aaa by Moody’s Investors Service and AAA by Standard & Poor’s.
Yields on the second series, $55.4 million of state moral obligation revenue bonds, ranged from 0.57% with a 4% coupon in 2013 to 4.00% with a 5% coupon in 2041. Credits maturing in 2012 were offered via sealed bid. The bonds are callable at par in 2021. They are rated Aa2 by Moody’s and AA by Standard & Poor’s.
In the competitive market, U.S. Bancorp won $94 million of San Francisco City and County revenue bonds, which carry a Aa3 rating by Moody’s, AA-minus rating by Standard & Poor’s, and A-plus rating by Fitch. Pricing was not available by press time.
