NEW YORK – Secondary municipal market activity remained light in early afternoon trading, as the focus is on new deals in the primary market. Yields remain flat from yesterday, while Treasuries have strengthened.
A trader in San Francisco said new issues remain scarce in California and primary market activity elsewhere hasn’t been dramatic enough to drive any trends there.
“We’re looking for some guidance but not really getting any,” he said.
“There are no changes in the scales, and of course everybody’s kind of sitting back a little back to see what the Fed says,” he added, referring to the Federal Open Market Committee’s monetary policy statement, which should be released at 2:15, Eastern time.
A trader in New York said people are waiting for new issues to price.
In the new-issue market today, Barclays Capital priced $119.5 million of revenue bonds for the Pennsylvania Higher Educational Facilities Authority.
The deal, rated A-minus by Standard & Poor’s and A by Fitch, offers maturities between 2011 and 2040, with yields ranging from 0.85% to 4.63%.
Also, Jefferies & Co. priced $90.93 million of general obligation bonds for New Castle County, Del.
The bonds, rated triple-A by each of the major rating agencies, are offered in two series.
The first series is $40 million of tax-exempt bonds. Maturities range from 2012 to 2022, with yields from 0.42% to 2.66%. The second series is $50.91 million of taxable debt. Maturities range from 2017 to 2040, with yields ranging from 2.88% to 5%.
Spreads on the taxable debt are 80 basis points over comparable Treasuries on the short end, up to 150 basis points in the intermediate range, and 113 basis points for the 30-year bonds.
The Municipal Market Data triple-A scale yielded 2.40% in 10 years and 3.34% in 20 years Monday, unchanged from Friday. The scale for 30 year debt also remained unchanged at 3.76%.
Yields have generally been rising in the past three weeks after a series of record lows in late August.
Yields on the 10-year and 30-year triple-A scale bottomed out at 2.17% and 3.67%, respectively, on Aug. 25. The 20-year low of 3.28% was set Aug. 31.
Monday’s triple-A muni scale in 10 years was at 88.6% of comparable Treasuries and 30-year munis were at 97.2%, according to MMD. The scale for 30-year tax-exempt triple-A GO bonds were at 107.1% of the comparable London Interbank Offered Rate.
Treasuries rallied across the board this morning and in the afternoon shed another basis point or two in the long-end.
The benchmark 10-year note yielded 2.67% in the early afternoon today, four basis points lower than Monday’s close at 2.71%. At the start of the month it yielded 2.47%, a calendar year low.
The 30-year bond was recently quoted at 3.84%, or three basis points lower than Monday’s close at 3.87%. The two-year yield remained at 0.46%, one basis point lower than Monday’s closing yield.
Also in the new issue market, Bank of America Merrill Lynch priced $57.19 million of tax-exempt revenue bonds for the University of Hawaii. The offer is priced in two series and includes maturities from 2011 to 2019, with yields ranging from 0.60% to 2.67%.
The bonds are rated Aa2 by Moody’s Investors Service, A-plus by Standard & Poor’s, and AA by Fitch Ratings.
In addition, Rice Financial will be pricing $200 million of water and sewer revenue refunding bonds for New York City’s Municipal Water Finance Authority.
The deal is rated Aa2 by Moody’s, AA by Standard & Poor’s, and AA-plus by Fitch Ratings.
Citi is expected to offer $197 million in an institutional pricing for the Dormitory Authority of the State of New York, borrowing on behalf of the City University of New York.
Fitch Ratings gives the CUNY bonds AA-minus with a stable outlook, while Standard & Poor's rates them AA-minus with a stable outlook and Moody's rates the credit an equivalent Aa3.
After a retail period yesterday, Jefferies & Co. is pricing for institutions a $287.4 million deal for Nashville and Davidson Counties, Tenn.
The refunding bonds, rated Aa1 by Moody’s and AA by Standard & Poor’s, offer maturities between 2011 and 2024. Yields range from 0.57% in 2012 to 3.03% in 2024.
In new economic data, the Commerce Department reported that housing starts rose by 10.5% in August to an annualized pace of 598,000, beating market expectations for a smaller increase to 550,000. Single-family housing starts, the key component of the report, rose 4.3% to an annualized pace of 438,000.
Housing starts are now at a four-month high and 2.2% above their level one year ago. However, the index remains “a stunning 73.7% below their January 2006 peak,” according to Steven Wood, chief economist at Insight Economics.
Ellen Zentner, senior macro economist at the Bank of Tokyo-Mitsubishi, noted this is the first of many housing activity reports this week which should report a pick-up after the payback period following the expiration of the government’s tax credit for first-time homebuyers.
“While housing activity from here is not expected to race forward, it does appear that we have survived the withdrawal of government stimulus and the housing market is standing on its own, albeit, wobbly feet,” she added.
Visible Supply
The Bond Buyer’s 30-day visible supply rose $786.2 million to $12.730 billion. The total is comprised of $2.394 billion of competitive bonds and $10.335 billion of negotiated bonds.
Previous Session's Activity
The Municipal Securities Rulemaking Board reported 35,801 trades of 14,117 issues for volume of $9.09 billion. Most active was Michigan’s Kalamazoo Hospital Finance Authority 5.00s of 2020 that traded 464 times at a high of 101.000 and a low of 97.179.
