NEW YORK — Activity in the municipal bond secondary market has picked up Thursday as the week’s primary deals find their way there. Still, some deals are clearing more cheaply during the rally, a trader in New York said.
“We’re seeing a rally today; it’s spurred some buyers,” he said. “You still get things a little cheaper, like four or five basis points on the long end on some things. People definitely want to move paper.”
Primary market deals that have been priced correctly have seen activity, he added. Those deals priced to retail have moved. Those that weren’t have been looking for buyers.
Trust buyers and retail buyers tend not to touch big dollar prices that typically accompany bonds with 5.00% coupons: they think they’re losing money somewhere along the lines.
“If you priced it right, you get those 3.00% to 4.00% coupons in there and keep the dollar price low, you start seeing some flow,” the trader said. “If you start throwing those 5.00% coupons in there, you’re not going to get there too quickly, that’s for sure.”
Tax-exempt yields have been following Treasury yields Thursday. They are unchanged through six years, according to the Municipal Market Data scale. Yields from seven to 16 years are flat to three basis points lower. Beyond 16 years, muni yields are one to four basis points firmer.
The benchmark 10-year muni yield weakened Wednesday. It rose three basis points to 2.58%; it has soared 61 basis points since it reached a record low on Sept. 23.
The two-year yield climbed two basis points on the day to 0.45%. The 30-year yield also increased two basis points, to 3.75%.
Treasury yields have also been firming. The benchmark 10-year Treasury yield has fallen five basis points to 2.16%. Before Thursday, it had soared 43 basis points in six sessions.
The 30-year has also dropped five basis points to 3.20%. The two-year yield slipped two basis points to 0.27%.
The industry anticipates a drop in volume this four-day week. Roughly $6.93 billion is expected, on the heels $8.23 billion last week. The negotiated side has seen the largest new volume.
In negotiated deals Thursday, the state of Washington came to market with just under $1 billion in bonds. The bonds are rated Aa1 by Moody’s Investors Service and AA-plus by Standard & Poor’s and Fitch Ratings.
The state led with JPMorgan pricing $521 million of Motor Vehicle fuel tax general obligation bonds, SR 520 corridor program toll revenue. Yields ranged from 1.95% with a 5.00% coupon in 2017 to 4.20% with a 5.00% coupon in 2041.
JPMorgan also priced $464.2 million of Washington state refunding bonds in two series. The amount was downsized from an anticipated $772.2 million.
Yields for the first series, $425.3 million in various purpose GO refunding bonds, ranged from 0.60% with a 4.00% coupon in 2013 to 3.38% with a 5.00% coupon in 2024. Debt maturing in 2012, in a split maturity, was offered in a sealed bid.
Yields for the second series, $38.9 million of Motor Vehicle fuel tax GO refunding bonds, ranged from 0.92% with a 2.00% coupon in 2014 to 3.24% with a 5.00% coupon in 2023. Credits maturing in 2012 were offered in a sealed bid.
On the competitive side of the market, Citi won $70 million of Shoreline School District No. 412, Wash., unlimited tax GOs for the Washington State School District credit enhancement program. The bonds were rated Aa1/Aa2 by Moody’s and AA-plus/A-plus by Standard & Poor’s.
Yields ranged from 0.95% with a 3.00% coupon in 2014 to 4.12% with a 4.00% coupon in 2028. Credits maturing in 2012, 2013, 2029, and 2030 were not reoffered.
