A flurry of bids-wanted continued to surface throughout the trading session Wednesday, particularly Puerto Rico issues, though traders said sellers were cautious to give up bonds to buyers demanding near double-digit yields.
Kyle Bass, founder of Hayman Capital Management also caused a stir in the municipal bond market, calling Puerto Rico debt "completely junk" on CNBC.
"There are a ton of bids-wanted but no one wants to sell at the bottom," a New York trader said. "We've got buyers only buying at double-digit yields."
This trader said bids-wanted included longer-dated Puerto Rico Public Building Authority 5s at 10%, another longer-date Public Building Authority 6.5 at 10%, and Puerto Rico Electric Power Authority bonds in the middle of the curve at a 7% yield. Puerto Rico Sales Tax Financing Corp. bonds were also yielding double digits, he said. "Puerto Rico is junk. Yields are higher than a week or two ago. And compared to a month ago they are well off."
In the primary market, Bank of America Merrill Lynch priced for retail the largest deal of the week, $584.5 million of Wisconsin general obligation bonds, rated Aa2 by Moody's Investors Service and AA by Standard & Poor's and Fitch Ratings.
Yields on the first series of $402.7 million of general obligation refunding bonds ranged from 0.70% with a 3% coupon in 2016 to 4.20% with a 4.125% coupon in 2033. The bonds are callable at par in 2023.
The second series of $181.8 million of GO refunding bonds were not offered for retail.
Morgan Stanley priced for retail $176.1 million of Connecticut Housing Finance Authority mortgage finance program bonds, rated triple-A by Moody's and S&P.
Bonds in the first series of $29.9 million were priced at par to yield from 0.60% in 2015 to 3.00% in 2021.
Bonds in the second series of $127.4 million were priced at par to yield from 3.00% in 2021 to 4.15% in 2028. Bonds maturing in 2033 were not offered for retail.
Bonds in the third series of $18.1 million, subject to the alternative minimum tax, were priced at par to yield from 0.45% and 0.55% in a split 2014 maturity to 2.20% in 2018.
Bonds in the fourth series of $780,000, also subject to the alternative minimum tax, were priced at par to yield from 0.60% in 2014 to 3.40% in 2021.
One New York trader said the retail order period was terminated due to overwhelming interest and the institutional order period is expected to be accelerated a day.
On Tuesday, yields on the triple-A Municipal Market Data scale ended as much as two basis points higher. The 30-year yield rose one basis point to 4.12%. The 10-year was flat for the fifth session at 2.54% and the two-year was steady for the sixth session at 0.37%.
Yields on the Municipal Market Advisors benchmark scale also ended as much as two basis points higher. The two-year and 10-year yields rose one basis point each to 0.55% and 2.71%, respectively. The 30-year yield increased two basis points to 4.28%.
The Treasury yield curve continued to steepen Wednesday afternoon. The two-year yield fell one basis point to 0.39%. The benchmark 10-year yield rose two basis points to 2.66% and the 30-year yield climbed three basis points to 3.73%.