Munis softened somewhat Wednesday afternoon, as investors look toward Friday's employment report for clues about interest rates.
Yields on bonds up to six-years were steady, though bonds from seven years and out climbed as much as two basis points, according to the Municipal Markets Data triple-A scale.
"Munis are a tad weaker, but we're definitely outperforming Treasuries it seems," a trader based in New York said in an interview. "It got a little overdone on the front end to say the least."
"A lot of guys aren't going to make any big bets before unemployment comes out on Friday," the New York trader said.
Treasuries weakened Tuesday afternoon with yields on 10-year government bonds jumping to the highest yield in about two weeks.
"On Monday, Janet Yellen's speech led to an unwind of curve flattening bets, triggering an outperformance of short-term rates and an underperformance of long-term rates as accounts closed out their positions," Janney's Guy Lebas said in a report Tuesday.
Wednesday, yields on the 10-year Treasury benchmark rose one basis point to 2.80%, the highest level since March 19. The 10-year yield has gained 90 basis points from 1.86% a year ago, though yields are below the average 3.46% over the past decade, according to MMD data.
Long-term Treasury yields slipped one basis to 3.65% Wednesday. Two-year notes also fell two basis points to 0.47%.
This week's light issuance slated at $4.19 billion, down from last week's $4.78 billion of issuance is heavy with higher education deals, one of which was priced Tuesday.
RBC Capital Markets brought a four-part deal totaling $250.7 million for the San Jose-Evergreen Community College District of Santa Clara, Calif.
Yields on $31.6 million of general obligation bonds ranged from 0.323% with a 2% coupon in 2015 to 3.60% with a 5% coupon in 2032. Yields on $120 million of GOs ranged from 0.22% with a 2% coupon in 2015 to 4.24% with a 4.125% coupon in 2043.
Yields on $50.9 million of GOs ranged from 2.11% with a 2% coupon in 2021 to 3.35% with a 5% coupon in 2029. The three bond series are callable at par in 2024.
Yields on $48.3 million of refunding bonds ranged from 0.17% with a 1% coupon in 2014 to 1.46% with a 5% coupon in 2019. This series are not callable. The deal received an Aa1 rating from Moody's Investors Service and an AA rating from Standard & Poor's.
The Regents of the University of California's two-part $968.24 million general revenue bonds will come to market Wednesday, with the $559.49 million tax-exempt portion to be priced for retail and the $408.75 million taxable portion accepting indications of interest.
"You got the big Cal deal in the market, but that's really it," the same trader said. "They're going to price those bonds to go; the new issue market has been priced cheaper than the secondary for a while now."
The bonds are rated Aa2 by Moody's and AA by S&P. Wells Fargo Securities is managing underwriter for the tax-exempts and Goldman, Sachs & Co. is lead underwriter for the taxable bonds.
J.P. Morgan Securities priced $220.5 million Karegnondi Water Authority of Genesee, Lapeer and Sanilac counties in Michigan water supply bonds late Monday afternoon, with yields ranging from 1.46% with a 3% coupon in 2017 to 4.89% at a 5% coupon in 2043.
The bonds, which feature an optional par call in 2023, carry A2 and A-plus ratings from Moody's and S&P, respectively.
In the competitive market, Bank of America Merrill Lynch appears to have won the bid for $120 million Lincoln Public School District, Neb., GOs, with a TIC of 3.8125%. The deal is rated AA1 by Moody's and AAA by S&P.
