NEW YORK – The biggest deals in the tax-exempt market took small concessions as they competed for attention in the primary market Wednesday. Despite some lower adjusted prices, traders said demand is still strong.
“Today is the heaviest new issue day of the week and that’s getting all the attention,” said a trader in Atlanta. “That’s where the focus is and where money is but it does seem like there is decent underlying interest for bonds.” He added bonds that are priced cheaper are “disappearing” if they are adjusted down in price. “The market is a touch softer but it’s mostly driven by new issues coming out.”
Munis continued to weaken early Wednesday afternoon, according to the Municipal Market Data scale. Yields inside six years were steady while the eight- and nine-year yields rose up to two basis points. Outside nine years, yield increased up to three basis points across the curve.
On Tuesday, the two-year yield was steady at 0.26%, its record low as recorded by MMD on Thursday. The previous record of 0.29% was set Feb. 7. The 10-year yield rose three basis points to 1.86% while the 30-year yield rose four basis points to 3.27%.
Treasuries were stronger Wednesday afternoon. The benchmark 10-year yield and the 30-year yield fell three basis points to 2.02% and 3.16%, respectively. The two-year was steady at 0.31%.
In the negotiated market, Goldman, Sachs & Co. priced $860 million of Regents of the University of California taxable general revenue bonds late Tuesday evening, rated Aa1 by Moody’s Investors Service, AA by Standard & Poor’s, and AA-plus by Fitch Ratings.
The deal was only sold to institutional investors. “It was supposed to be a multi-day deal and the interest was so strong we decided to close down shop in one day,” said a spokesman for the California state treasurer. “Demand was so high we decided to increase the size from $500 million to $860 million.”
The 100-year “century bonds” yielded 4.858%, 165 basis points over the 30-year U.S. Treasury rate of 3.208%, the spokesman said.
Morgan Stanley took retail orders for a second day on $800 million of New York City general obligation bonds. The bonds are rated Aa2 by Moody’s Investors Service, and AA by Standard & Poor’s and Fitch Ratings. Pricing details were not available by press time.
Barclays Capital preliminary priced $363 million of Wisconsin general obligation refunding bonds, rated Aa2 by Moody’s and AA by Standard & Poor’s and Fitch.
Yields ranged from 0.38% with a 3% coupon in 2014 to 3.00% with a 5% coupon in 2031. The bonds are callable at par in 2022.
Wells Fargo priced $356.2 million of Virginia Public School Authority school financing bonds, rated Aa1 by Moody’s and AA-plus by Standard & Poor’s and Fitch. Pricing details were not available by press time.
Bank of America Merrill Lynch priced $318 million of San Francisco Airport Commission revenue bonds Wednesday. The bonds are rated A1 by Moody’s and A-plus by Fitch.
Yields on the first series, $208.9 million of bonds subject to the alternative minimum tax, ranged from 2.44% with a 5% coupon in 2024 to 4.07% with a 5% coupon in 2032. The bonds are callable at par in 2022.
Yields on the second series, $109.1 million of bonds not subject to the alternative minimum tax, ranged from 0.61% with a 2.5% coupon in 2014 to 3.32% with a 5% coupon in 2030. The bonds are callable at par in 2022.
Morgan Stanley priced $241 million of Board of Regents of the University of Texas System revenue financing system refunding bonds, rated triple-A.
Yields ranged from 0.29% with a 4% coupon in 2014 to 3.42% with a 5% coupon in 2043. Credits maturing in 2013 were offered via sealed bid. The bonds are callable at par in 2022.
In the secondary market, trades reported by the Municipal Securities Rulemaking Board showed firming Wednesday.
Bonds from an interdealer trade of Metropolitan Transit Authority of New York 7.134s of 2030 yielded 4.68%, six basis points lower than where they traded Tuesday.
Bonds from another interdealer trade of Bay Area Toll Authority 6.793s of 2030 yielded 4.89%, four basis points lower than where they traded Tuesday.
A dealer bought from a customer Chicago 6.034s of 2042 at 5.70%, four basis points lower than where they traded Tuesday.
A dealer sold to a customer Connecticut 5.770s of 2025 at 3.36%, four basis points lower than where they traded Friday.
