NEW YORK – The tax-exempt market was slightly weaker for the fourth consecutive trading session although traders noted secondary activity was starting to quiet down as the weekend approached.
“It is extremely quiet today,” a New York trader said. “I am seeing a bunch of bids-wanted and pieces are weaker but most of the trade flow is happening in the 2025, 2026, and 2027 and on out because action is where the yield is.”
He added that the Puerto Rico Public Buildings Authority deal helped the market today. “They shut down a few maturities already. It went pretty well considering there were downgrades in that arena. People are yield hungry regardless of credit quality.”
He added that yield-hungry investors make for some good trades, but 12 to 36 months out, “things could get ugly.”
Munis continued to weaken Thursday afternoon, according to the Municipal Market Data scale. Yields inside four years were steady while the five- and six-year yields jumped as much as three basis points. Outside seven years, yields spiked up between three and five basis points.
On Wednesday, the 10-year yield and the 30-year yield jumped seven basis points each to 1.85% and 3.16%. The two-year was steady at 0.32% for the fourth consecutive trading session.
After rising 10 basis points so far this week, the 10-year yield now remains 18 basis points above its record low of 1.67% set Jan 18. After the 30-year yield jumped 12 basis points so far this week, the yield remains 12 basis points off its record low of 3.04% set on Friday.
Treasuries were mixed Thursday afternoon. The two-year yield rose one basis point to 0.28% while the 10-year yield fell two basis points to 1.65%. The 30-year was steady at 2.74%.
In the negotiated market, Morgan Stanley priced and re-priced $855.5 million of Illinois Metropolitan Pier and Exposition Authority bonds in tax-exempt and taxable series, rated AAA by Standard & Poor’s and AA-minus by Fitch Ratings.
The first series, $94.7 million of McCormick Place expansion project bonds, yielded 4.15% with a 5% coupon in 2042. The bonds are callable at par in 2022. Yields were lowered five basis points from preliminary pricing.
Yields on the second series, $748.8 million of McCormick Place expansion project refunding bonds, ranged from 1.98% with a 3% coupon in 2018 to 4.50% with a 5% coupon in 2052. Credits maturing in 2013 were not formally re-offered. The bonds are callable at par in 2022 except for bonds maturing in 2022 which are callable at par in 2017. Yields were lowered as much as 12 basis points from preliminary pricing.
Bonds on the third series, $12 million of taxable series refunding bonds for the McCormick Place expansion project, were priced at par to yield 0.44% in 2012 and 0.70% in 2013.
Goldman, Sachs & Co. priced $589 million of Puerto Rico Public Buildings Authority government facilities revenue refunding bonds, rated Baa1 by Moody’s Investors Service, BBB by Standard & Poor’s, and BBB-plus by Fitch.
Yields ranged from 1.82% with a 4% coupon in 2014 to 5.45% with a 5.25% coupon in 2042. The bonds are callable at par in 2022.