The tax-exempt market appeared to turn around Thursday morning as traders said the market looked stronger after weaker sessions earlier in the week.
“It’s a little bit stronger, but nothing special,” a New York trader said. He added activity was busier – similar to Wednesday’s trading session – but still spotty.
In the primary market Wednesday, JPMorgan and Wells Fargo Securities are expected to price for institutions $10 billion of California revenue anticipation notes, following a two-day retail order period. The notes are rated MIG-1 by Moody's Investors Service, SP-1-plus by Standard & Poor's and F-1 by Fitch Ratings.
In the retail order periods Monday and Tuesday, bonds in the first series of $2.5 billion yielded 0.30% to 0.40% with a 2.5% coupon in 2013. Other portions of credits maturing in 2013 were not offered for retail.
Bonds in the second series of $7.5 billion yielded 0.40% to 0.55% with a 2.5% coupon in 2013.
Retail investors placed about $3.235 billion of orders in the two-day retail pricing, according to a spokesman for the California state treasurer’s office. The retail orders that were placed make up 40.4% of the $8 billion of RANs that were offered to retail and 32.3% of the total $10 billion offering.
“We’re very satisfied with the retail results,” the spokesman said. “Now we have to complete the job at the best possible price for taxpayers.”
Ramirez & Co. is expected to price $290.5 million of Cities of Dallas and Fort Worth, Texas, Dallas-Fort Worth International airport joint revenue refunding bonds, subject to the alternative minimum tax. The bonds are rated A1 by Moody’s and A-plus by Standard & Poor’s and Fitch.
On Wednesday, the 10-year Municipal Market Data yield climbed seven basis points to 1.87%, while the 30-year yield rose five basis points to 3.00%. The two-year finished unchanged at 0.29% for the 15th straight session.
Treasuries were stronger Thursday morning for the first time this week. The benchmark 10-year yield dropped two basis points to 1.79%. The two-year and 30-year yields fell one basis point each to 0.29% and 2.90%, respectively.
In economic news, housing starts fell 1.1% to a seasonally adjusted rate of 746,000 in July from a revised 754,000 in June. The drop in housing starts failed to meet analyst expectations of 755,000.
Building permits jumped 6.8% to a seasonally adjusted annual rate of 812,000 from a revised 760,000 the month prior, beating the 769,000 projected by economists.
“Despite the drop in single-family housing starts, this report remains consistent with improving activity levels in the housing sector,” wrote economists at RDQ Economics. “Measures of home prices have already pointed to stabilization and builder optimism has continued to improve. The rise in building permits, which shows the level of single-family permits above that for starts, points to further improvement ahead for construction. The Fed has put very significant emphasis on housing holding back the recovery in its analysis and the signs of improvement in housing could persuade some at the Fed that the recovery is becoming more self-sustaining.”
In other economic news, seasonally adjusted initial jobless claims rose 2,000 to 366,000 for the week of August 11, coming in about par with analyst expectations of 365,000.
Continuing claims fell 31,000 to 3.305 million for the week of August 4.
“The unemployment claims data point to improving conditions in the labor market as the four-week average of claims is only slightly higher than the low reading for March,” RDQ economists wrote. “The four-week average of claims should be relatively free of the distortions produced by the changed pattern of factory shutdowns in early July and next week’s reading aligns with the payroll survey week for August payrolls.”