NEW YORK – The only factor that could possibly slow the muni rally was issuance, which threatened to create too much supply, and force yields higher. But that obstacle is out of the way. Deals were priced well Tuesday and there was enough demand to meet that supply.
“It’s nothing short of a bond grab,” said a trader in New Mexico. “That’s what was expected with money being generated internally with calls and coupons being paid and a slowdown in issuance.”
He added that both retail and institutional buyers are participating in the market. “Institutions are getting coupons paid and bonds called and trying to get that money reinvested.” For the retail side, muni bond mutual funds are seeing inflows. “Cash flows are picking up so there is more pressure on managers to get that money reinvested,” he said.
Munis were steady to firmer in morning trading, according to the Municipal Market Data scale. Yields on the three-year and four-year fell two basis points while yields from the five-year to 11-year were steady or fell one basis point. The 12-year yield dropped two basis points and the 13-year yield fell between one and three basis points. Outside the 14-year, yields plunged between two and four basis points.
On Monday, the two-year yield fell two basis points to 0.40%. The 10-year yield closed down two basis points to 1.83%, tying the record low as recorded by MMD set Dec. 30. The 30-year fell five basis points to 3.45%, only one basis point above the record low of 3.44% as recorded by MMD on Sept. 23.
And after a small sell off Tuesday morning, Treasuries yields are falling again. The two-year yield dropped a basis point to 0.25% while the benchmark 10-year yield and the 30-year yield are back to Monday’s levels at 1.96% and 3.02%, respectively.
In the primary market, JPMorgan took indications of interest for $150.6 million of Nashua City, N.H., federally taxable general obligation Pennichuck Corp. acquisition bonds. The credit is rated Aa2 by Moody’s Investors Service and AAA by Fitch Ratings.
Maturities ranged from 2013 to 2042. The bonds were priced to yield between 75 basis points and 180 basis points over the comparable Treasury yield.
Morgan Stanley took indications of interest on $108 million of Virginia Port Authority taxable commonwealth port fund revenue refunding bonds. The bonds are rated Aa1 by Moody’s and AA-plus by Standard & Poor’s and Fitch.
Maturities ranged from 2013 to 2027. The bonds were priced to yield between 60 basis points and 185 basis points above the comparable Treasury yield.
In the competitive market Tuesday, Bank of America Merrill Lynch won the bid for $238.8 million of Florida Department of Transportation general obligation bonds. The credit is rated Aa1 by Moody’s and AAA by Standard & Poor’s and Fitch Ratings.
Yields ranged from 1.27% with a 5% coupon in 2018 to 2.44% with a 5% coupon in 2024. Credits maturing from 2012 to 2017, 2020, 2021, and from 2025 to 2041 were sold but not available. The bonds are callable at par in 2021.
Barclays Capital won the bid for $230 million of Colorado short-term notes, rated M1G-1 by Moody’s and SP-1-plus by Standard & Poor’s.
PNC Capital Markets won the bid for $175 million of Allegheny County, Pa. short-term notes, rated SP-1-plus by Standard & Poor’s.
In the secondary market, trades reported by the Municipal Securities Rulemaking Board show firming.
A dealer sold to a customer New York State Housing Finance Agency 5s of 2036 at 2.82%, 25 basis points lower than where they traded last week.
Another dealer sold to a customer California Statewide Communities Development Authority 5s of 2041 at 4.38%, 12 basis points lower than where they traded the week prior.
Bonds from an interdealer trade of Washington 5s of 2025 yielded 2.55%, 12 basis points lower than where they traded last week.
Bonds from another interdealer trade of New York City Industrial Development Agency 5s of 2046 yielded 6.04%, six basis points lower than where they traded the previous week.
