NEW YORK – Despite choppy Treasuries, munis are firmer Thursday as lack of supply gives the impression that demand is high.
“It’s been a consistent grind and a similar atmosphere over the past few weeks,” said a trader in North Carolina. “There is not enough paper around with the primary being so dry.”
He added that most of the activity is in the long end. “Most of push has been in the 15-year to 30-year. It’s a yield grab.” That’s even more shocking given that “everything has tightened significantly from where it’s supposed to be – especially in the 20-year to 30-year maturities.” The trader said there is no value or activity inside the 10-year.
“Munis are definitely better,” he said, referring to an increase in prices. “We are seeing about two to four basis points in the 20-year and one to three basis points in the 30-year.”
In Thursday early afternoon trading munis continued to strengthen, according to the Municipal Market Data scale. Yields on credits maturing in 2013 dropped between three and five basis points. Yields on the two-year to eight-year were steady while yields on the nine-year fell one basis point. Yields on the 10-year to 12-year maturity fell two basis. Outside the 13-year maturity, yields dropped between one and three basis points.
On Wednesday, the two-year finished flat at 0.42%. The 10-year yield closed steady at 1.88% and the 30-year finished at 3.57%, also unchanged from the prior session.
Treasuries were choppy Thursday. By afternoon, Treasuries had pared all gains made in the morning, and were back to Wednesday’s levels. The two-year yield rose one basis point from morning trading to 0.27%. The benchmark 10-year yield jumped three basis points from morning trading to 1.99%. The 30-year yield moved up four basis points to 3.05%.
In the primary market, Thursday was the most active day of the week in the primary market.
RBC Capital Markets priced $163.6 million of Board of Regents of Texas Tech University System revenue financing system and refunding and improvement bonds. The credit is rated AA by Standard & Poor’s and Fitch Ratings.
Yields ranged from 0.18% with a 2% coupon in 2012 to 4.08% with a 4% coupon in 2041. The bonds are callable at par in 2021.
“The only major deal of the week, Texas Tech University saw strong interest in a number of maturities,” said MMD’s Randy Smolik. “They were able to pare yields in the 2015-2025 range and longer than 2030, in some cases by as much as six basis points.”
On the competitive calendar, Bank of America Merrill Lynch won the bid for $83.6 million of Suffolk County Water Authority water system revenue refunding bonds. The credit is rated AA-plus by Standard & Poor’s and AAA by Fitch.
Yields ranged from 1.44% with a 5% coupon in 2019 to 2.08% with a 4% coupon in 2022. Bonds maturing between 2023 and 2026 were sold but not available. The debt is callable at par in 2021.
In the secondary market, trades reported by the Municipal Securities Rulemaking Board showed firming.
A dealer bought from a customer Orange County, Fla., Health Facilities Authority 5s of 2039 at 4.42%, 15 basis points lower than where they traded Wednesday.
Another dealer bought from a customer California 5.125s of 2033 at 4.20%, 11 basis points lower than where they traded Tuesday.
Bonds from an interdealer trade of New York Liberty Development Corp. 5s of 2041 yielded 4.09%, nine basis points lower than where they traded Wednesday.
Bonds from an interdealer trade of Washington 5s of 2035 yielded 3.62%, four basis points lower than where they traded Wednesday.
