NEW YORK – Secondary activity is slowing in the afternoon as traders digest new issuance.
“It’s pretty selective and slowing down in the secondary,” said a trader in New York. “I think people got new issuance out of the way yesterday and earlier today.”
He added the “majority of volume is from new issuance being passed through at this point.” Interest is also focused in the belly of the curve.
The end of the year is also on traders’ minds. “Yields are drifting lower as Treasuries are but it seems like some of the accounts are well lined up going into year end and things are starting to wind down,” he said.
Munis were flat to slightly stronger, according to the Municipal Market Data scale. Yields inside the six-year were steady. Yields on the seven- to nine-year muni fell up to two basis points while yields beyond the 10-year fell up to one basis point.
On Tuesday, the two-year muni yield closed flat at 0.36% for its fifth consecutive trading session. The 10- and 30-year muni yield closed down one basis point each to 1.96% and 3.68%, respectively.
Treasuries continued to rally early Wednesday afternoon. The benchmark 10-year yield fell five basis points to 1.92% while the 30-year yield fell eight basis points to 2.93%. The two-year yield rose one basis points to 0.25%.
In the primary market, Wells Fargo opened its first day of retail on $281.2 million of Puerto Rico Infrastructure Financing Authority revenue bonds. The bonds are rated Baa1 by Moody’s Investors Service and BBB by Standard & Poor’s. A second day of retail and institutional pricing are expected Thursday.
Yields on the first series, $160 million of Series 2011 B bonds not subject to the alternative minimum tax, ranged from 2.38% with a 4% coupon in 2014 to 4.86% with a 5% coupon in 2025. Credits maturing in 2026 were not offered for retail. The bonds are callable at par in 2021.
Bonds on the second series, $121.2 million of Series 2011 C debt subject to the alternative minimum tax, matures in 2026 and was not offered for retail.
Siebert Brandford Shank & Co. priced $484.7 million of Detroit water supply system revenue bonds in two series. The credit is rated A1 by Moody’s and A-plus by Standard & Poor’s.
Yields on the first series, $382.4 million of water supply system revenue bonds, ranged from 0.83% with a 3% coupon in 2012 to 5.38% with a 5.25% with a 2041. The bonds are callable at par in 2021.
Yields on the second series, $102.3 million of water supply system revenue refunding bonds, ranged from 0.83% with a 3% coupon in 2012 to 5.34% with a 5% coupon in 2041. The bonds are callable at par in 2021.
Wednesday morning, Well Fargo priced for institutions $223.4 million of District of Columbia income tax secured revenue bonds.
The deal was originally scheduled to be a competitive transaction but was switched to negotiated after 100% of Tuesday’s $200 million of D.C. income tax secured bonds sold to retail investors.
“We decided to change the sale Wednesday to a negotiated sale due to an offer from the underwriters on Tuesday’s negotiated retail sale to underwrite the bonds to be offered Wednesday at very favorable pricing for the District,” said Lasana Mack, treasurer and deputy chief financial officer for D.C.
The credit is rated Aa1 by Moody’s, AAA by Standard & Poor’s, and AA-plus by Fitch Ratings.
Yields ranged from 3.09% with a 5% coupon in 2026 to 3.91% with a 5% coupon in 2036. The bonds are callable at par in 2021. Yields on the retail pricing Tuesday ranged from 0.30% with a 2% coupon in 2012 to 4% priced at par and 3.98% with a 5% coupon in a 2036 split maturity.
In the competitive market, JPMorgan won the bid for $158.4 million of Florida State Board of Education capital outlay refunding bonds. The credit is rated Aa1 by Moody’s and AAA by Standard & Poor’s and Fitch.
Yields ranged from 0.50% with a 2% coupon in 2013 to 4.05% with a 4% coupon in 2032. The bonds are callable at par in 2021.
