NEW YORK — New issuance remains the talk of the market, heading into Tuesday afternoon.
But news of the impact on municipal bonds of language within the American Jobs Act of 2011 has also filtered through the industry and generated a buzz. And though the fate of a proposal to limit to 28% the tax value of otherwise allowable deductions and exclusions won’t be decided for a time, it still has the industry’s full attention.
Many participants and analysts, though, noted that the proposal’s passage is extremely unlikely.
“We don’t view this proposal as an immediate threat to municipal bond tax exemption,” RBC Capital Market’s Chris Mauro wrote in a research brief. “The proposed limitation of deductions and exclusions would represent a significant change in the tax code. Such a change, we believe, would not be agreed to by the Senate Finance Committee and House Ways and Means Committee unless it was part of a sweeping, broad-based reform of the tax code and this kind of comprehensive reform will take a significant amount of time to put together.”
Flows in the secondary have been somewhat stable, a trader in North Carolina said. Some of the items on a large list of bank-qualified paper have gotten strong-to-stable bids.
“Most of the market is looking back to the primary to see the reception of the buying community,” the trader said. “Things seem somewhat stable. Obviously, we’re getting some downdraft on Treasuries. We seem to be holding in.”
At press time, the Municipal Market Data scale had yet to be updated. Earlier in the day’s session, yields held steady across the curve.
The benchmark 10-year yield Monday held at a record low of 2.07%, as measured by MMD.
The 30-year yield remained unchanged at 3.66%, its lowest level in at least three decades. The two-year yield stayed at 0.30% for a 23rd consecutive session, hovering at its lowest level in more than 40 years.
Treasury yields were mixed, though mostly weaker, crossing noon. The 10-year benchmark yield has increased four basis points to 1.99%, still near a range it hasn’t seen in roughly five decades.
The 30-year yield has risen five basis points to 3.31%. The two-year yield inched down one basis point to 0.21%.
Volume in the primary appears to be increasing gradually from last week’s trifling level. Industry estimates place new issuance for this week at $4.65 billion, not including $5.4 billion of California revenue anticipation notes. Estimates for last week’s volume were revised downward to $1.95 billion.
In the negotiated market, Barclays Capital priced for retail $424.4 million of Trustees of the California State University systemwide revenue bonds. The bonds are rated Aa2 by Moody’s Investors Service and A-plus by Standard & Poor’s.
Yields range from 0.37% with a 2.00% coupon in 2012 to 4.23% with a 4.125% coupon in 2031. Debt maturing from 2024 through 2026, from 2028 through 2030, and in 2036 and 2042 are not available for retail.
Bank of America Merrill Lynch priced $161.5 million of Wisconsin Health and Educational Facilities Authority revenue bonds. The bonds are rated A1 by Moody’s and A-plus by Standard & Poor’s and Fitch Ratings.
Yields range from 1.36% with a 2.50% coupon in 2013 to 5.40% with a 5.25% coupon in 2039. Credits maturing in 2012 were offered in a sealed bid.
In the competitive market, Citi won $146.7 million of Missouri Board of Public Buildings special obligation refunding bonds. The bonds are rated Aa1 by Moody’s and AA-plus by Standard & Poor’s and Fitch.
Yields range from 0.48% with a 4.00% coupon in 2014 to 4.00% with a 1.00% coupon in 2028. Debt maturing in 2013, and from 2015 through 2017, was not formally reoffered.
