NEW YORK – The municipal market was unchanged to slightly firmer today, as JPMorgan continued retail pricing on the mammoth $8.8 billion California revenue anticipation note sale.
Traders said tax-exempt yields were flat to lower by two or three basis points.
“There isn’t a ton of movement out there, but we’re feeling a little bit firmer again,” a trader in New York said. “It’s flat in spots, maybe better by a couple basis points in others. It’s sort of spread out too, no specific area of the curve where gains are more pronounced than others. Just pretty much flat to a basis point or two better across the board.”
JPMorgan continued the retail pricing on California's $8.8 billion RAN deal for a second day today, ahead of institutional pricing tomorrow. The deal, which is the single-largest note deal so far this year, consists of Series A1 notes, which mature May 25, 2010, and Series A2 notes, which mature on June 23, 2010. The state will use a portion of the proceeds to repay JPMorgan, which lent California $1.5 billion in August to allow the state to begin redeeming the IOUs.
In today’s retail pricing, the $3.5 billion piece maturing in May 2010 yields 1.25% with a 3% coupon, while the $5.3 billion June 2010 piece yields 1.50% with a 3% coupon.
Tom Dresslar, spokesman for state Treasurer Bill Lockyer, said late yesterday that “no decisions have been made yet, but we’re exploring the possibility of shutting off the June maturity at $6 billion,”
If that’s the case, Dresslar said, and the $6 billion threshold is reached, the Treasurer hopes investors will gravitate to the May maturity.
While the RAN deal garnered the top short-term ratings of MIG-1 from Moody's Investors Service and SP-1 from Standard & Poor's, Fitch Ratings last week issued its F2 rating, two notches below its top rating of F1-plus.
The Treasury market was showed some gains today. The yield on the benchmark 10-year Treasury note, which opened at 3.48%, was quoted recently at 3.45%. The yield on the two-year note was quoted recently at 0.95%, after opening at 0.98%. And the yield on the 30-year bond, which opened at 4.23%, was quoted recently at 4.22%.
As of yesterday’s close, the triple-A muni scale in 10 years was at 77.3% of comparable Treasuries, according to MMD. Additionally, 30-year munis were 95.8% of comparable Treasuries. Also, as of yesterday’s close, 30-year tax-exempt triple-A rated general obligation bonds were at 98.1% of the comparable London Interbank Offered Rate.
The economic calendar was light today.
Visible Supply
The Bond Buyer’s 30-day visible supply fell $5.4 million to $8.699 billion. The total is comprised of $2.636 billion of competitive deals and $6.064 billion of negotiated bonds.
Previous Session's Activity
The Municipal Securities Rulemaking Board reported 34,811 trades of 13,767 separate issues for volume of $9.20 billion yesterday. Most active was Dallas Area Rapid Transit Build America Bonds 6.25s of 2034, which traded 117 times at a high of 105.000 and a low of 103.000.
