NEW YORK – The tax-exempt market picked up steam Tuesday afternoon as new deals flooded the market and kept traders busy. Some market participants noted that deals were being well received despite higher-drifting yields.
“The secondary is a little slow today with new issues in the market, but from what I’ve been hearing deals are going fairly well,” a New York trader said. “Some guys are a little heavy from last week, but with June reinvestment money kicking in we’ll have to see. New deals will dictate what will happen this week.”
He added that between the current refundings and the typically high reinvestment money in June and July, the amount of money in the market might be bigger than past years.
Despite deals being fairly well received, munis were weaker Tuesday afternoon, according to the Municipal Market Data scale. Yields between the three- and 11-year rose as much as two basis points. Outside 12 years, yields jumped between one and four basis points.
On Monday, the 10-year yield rose one basis point to 1.76%, nine basis points above its record low of 1.67% set Jan 18. The 30-year yield also increased one basis point to 3.05%, off the record low of 3.04% set Friday. The two-year yield was steady at 0.32% for the second session.
Treasuries continued to weaken for the second session. The benchmark 10-year yield rose two basis points to 1.55% while the 30-year yield jumped five basis points to 2.62%. The two-year yield hovered around 0.26%.
In the negotiated market, Wells Fargo Securities priced the largest deal of the week, $1.1 billion of Los Angeles County tax and revenue anticipation notes in three series. The notes are rated MIG-1 by Moody’s Investors Service, SP-1-plus by Standard & Poor’s and F1-plus by Fitch Ratings. Pricing details were not available by press time.
Goldman, Sachs & Co. held its second day of retail pricing for $800 million of New York City Transitional Finance Authority future tax-secured and tax-exempt subordinate bonds in two series. The bonds are rated Aa1 by Moody’s and AAA by Standard & Poor’s and Fitch.
Yields ranged from 0.55% with 2%, 4%, and 5% coupons in a split 2015 maturity to 3.37% with a 4% coupon in 2039. Credits maturing in 2014 were offered via sealed bid. Bonds maturing in 2024, 2025, 2029 and 2030, and between 2034 and 2038 were not offered for retail. The bonds are callable at par in 2022 except for credits maturing between 2026 and 2028 which are callable at par in 2018.
Yields were increased up to six basis points on the long end from the first day of retail pricing Monday.
Barclays Capital held preliminary pricing on $311 million of Metropolitan Washington Airports Authority airport system revenue refunding bonds, rated Aa3 by Moody’s and AA-minus by Standard & Poor’s and Fitch.
Yields on the first series, $290.2 million of airport system revenue refunding bonds subject to the alternative minimum tax, ranged from 1.44% with a 3% and 5% coupons in a split 2016 maturity to 4.125% priced at par in 2032. The bonds are callable at par in 2022.
Yields on the second series, $20.8 million of refunding bonds not subject to the alternative minimum tax, ranged from 0.40% with a 3% coupon in 2013 to 1.79% with a 5% coupon in 2019.
On the competitive calendar, Minnesota’s triple-A rated Metropolitan Council auctioned $223.5 million of general obligation bonds in four pricings - $93.9 million, $65 million, $57.6 million, and $7 million.
JPMorgan won the bid for $93.9 million. The bonds had 5% coupons from 2014 to 2025. Prices were not yet available. The bonds are callable at par in 2022.
JPMorgan won the bid for $65 million. The bonds had a 3% coupon in 2013 to a 4.5% coupon in 2032. Prices were not yet available. The bonds are callable at par in 2022.
Bank of America Merrill Lynch won the bid for $57.6 million. Yields ranged from 1.00% with a 4% coupon in 2018 to 3.16% with a 3% coupon in 2028. Credits maturing between 2013 and 2017 and between 2029 and 2032 were not formally re-offered. The bonds are callable at par in 2022.
JPMorgan won the bid for $7 million. Coupons ranged from 2% in 2013 to 5% in 2017. The notes were not formally re-offered.
In the secondary market, trades reported by the Municipal Securities Rulemaking Board over the past few trading sessions showed weakening.
A dealer sold to a customer Phoenix, Ariz., general obligation 4s of 2022 at 2.15%, 13 basis points higher than where they traded Friday.
Another dealer sold to a customer Virginia Commonwealth Transportation Board 4s of 2034 at 3.72%, seven basis points higher than where they traded Thursday.
Bonds from an interdealer trade of Tampa, Fla., Health System 4s of 2033 yielded 4.13%, four basis points higher than where they traded Thursday.
A dealer bought from a customer New Jersey Transportation Trust Fund Authority 5.754s of 2028 at 4.16%, one basis point higher than where they traded Thursday.
