The municipal bond market's tone continues to improve as some of the week's new issues filtered in Tuesday.
Muni yields thus far are moving lower with those of Treasuries and may well outperform before the day's session comes to a close, a trader in Chicago said. Trading in the secondary continues apace, as investors
Issuers that have underperformed recently have seen their spreads tighten to market scales, he added.
Some credits are "trading a little tighter, especially up in the front end of the curve," the trader said. "Obviously everyone wants to be up there because of possibly spiking interest rates, but everything top to bottom is grinding tighter spread-wise. Some of your names that have been beat up, like some of your New York credits, have gotten tighter, especially in that 15-year range, where it's kind of a dead zone."
Although investors anticipate few large issues this week, some deals have appeared. Potential long-term volume is expected to total $1.79 billion, up from sales of $10.8 million last week. Some market analysts, though, anticipate the calendar will reach about $2.5 billion this week.
JPMorgan priced the week's largest deal, which arrived on the negotiated calendar, $240 million of University of Texas Permanent University Fund bonds. They were rated triple-A by the major credit rating agencies.
The bonds arrived structured in a bullet maturity with a yield of 4.27% and a 5.00% coupon in 2041. The bonds are callable at par in 2023.
The deal should be well received, a trader in New York said.
"It's something people will look at because it's an issuer that doesn't come to market all that often," he said. "They definitely will have the spotlight, since there's lack of focus on any of the other large deals out in the marketplace at the moment."
JPMorgan also priced $81.8 million of Massachusetts Development Finance Agency revenue bonds for Phillips Academy in taxable and tax-exempt issues. The bonds are rated triple-A by Moody's Investors Service and Standard & Poor's.
Yields in the tax-exempt issue, $51.6 million, range from 4.19% with a 5.00% coupon in 2038 to 4.33% with a 5.00% coupon in 2043. The bonds are callable at par in 2023.
Yields in the taxable segment, $30.2 million, arrived with a coupon of 4.844% priced at par in 2043, at 95 basis points above the equivalent Treasury yield.
Barclays is expected to price $150 million of Massachusetts Development Finance Agency revenue bonds for Northeastern University on Thursday.
Yields on the Municipal Market Data triple-A scale are steady through two years. Thereafter they're flat to three basis points lower, with the greatest strength found in debt maturing between 10 and 27 years.
Triple-A, tax-exempt two-, 10- and 30-year yields each closed Monday's session one basis point lower. They measured 0.34%, 2.78% and 4.19%, respectively.
Yields on the Municipal Market Advisors benchmark triple-A scale firmed across much of the curve Monday by as much as two basis points. The 10-year triple-A yield slipped one basis point to 2.78%.The 30-year also slid one basis point to 4.40%, while the two-year declined two basis points to 0.35%.
Treasury yields started Tuesday morning lower and have mostly held their levels. The 10-year yield has fallen two basis points to 2.95%. The 30-year yield has slipped one basis points to 3.89%. The two-year inched down one basis point 0.40%.
In economic news, a positive U.S. November trade report showed improved U.S. exports, which should contribute to growth for the fourth quarter reading. Economists expect real GDP estimates to be revised higher, likely to plus-3% or so, driven by oil and aircraft exports.
The November trade deficit was-$34.3 billion, following a revised -$39.3 billion deficit in October. Both beat predictions.
Better export numbers signaled improved trade, rather than soft demand.
