Positive reception for new deals in the primary market wasn't enough to offset large institutional sellers in the secondary as yields on bonds maturing beyond 20 years jumped.
Traders said that most of the trades occurred on bonds maturing within seven years or beyond 20 years, but the longest maturing bonds took the biggest hit. "The long end is bad," a Pennsylvania trader said. "I think its 15 basis points off in the 20-year to 30-year range."
He added deals in the primary market are well received with triple-A rated Maryland pricing close to Tuesday's Municipal Market Data scale and the largest deal of the week - the Bay Area Toll Authority - upsizing due to demand.
Still, selling pressure in the secondary pushed yields higher. "Large mutual funds are selling to raise cash and the long end is very sloppy," the trader said. "Brokers looking for retail investors want a bond at par and sell to make two points. It doesn't matter what the fundamental value is."
With most of the trading occurring on bonds maturing before seven years or after 20 years, the belly of the curve was choppy, he said. "Inside seven years some orders have depth, and beyond 20-year you have a retail bid. Away from that it's by appointment."
Bank of America Merrill Lynch priced $900 million of Bay Area Toll Authority San Francisco Bay Area subordinate lien toll bridge revenue bonds, rated A1 by Moody's Investors Service and A-plus by Standard & Poor's. There were $2.3 billion orders placed and the deal was upsized from the original $750 million.
Yields ranged from 4.31% with a 5% coupon in 2027 to 5.45% with a 5.25% coupon in 2053. The bonds are callable at par in 2023. Yields were lowered five basis points on bonds maturing in 2027 and two basis points on bonds maturing in 2028 and 2043.
JPMorgan priced for institutions $508.9 million New York City general obligation bonds in two pricings following a two-day retail order period. The bonds are rated Aa2 by Moody's and AA by Standard & Poor's and Fitch Ratings.
Yields on the first pricing of $375 million ranged from 0.99% with a 3% coupon in 2016 to 4.88% with a 4.75% coupon in 2039. The bonds are callable at par in 2023. Bonds maturing in 2015 were offered via sealed bid. Yields were raised as much as six basis points on bonds maturing between 2021 and 2025 from retail pricing. Yields were raised between 12 and 16 basis points on bonds maturing in 2027, 2028, 2030, and 2035.
Yields on $133.9 million ranged from 0.99% with 2% and 4% coupons in a split 2016 maturity to 2.74% with 4% and 5% coupons in a split 2021 maturity. Bonds maturing in 2014 were offered via sealed bid. Yields were raised two basis points on bonds maturing in 2021 from retail pricing.
JPMorgan priced for institutions $173.9 million of Florida's Jacksonville Electric Authority water and sewer system revenue bonds following a retail order period Tuesday. The bonds are rated Aa2 by Moody's and AA by Standard & Poor's and Fitch.
Yields on the first series of $92.3 million ranged from 0.58% with a 3% coupon in 2015 to 4.11% with a 4.5% coupon in 2027. The bonds are callable at par in 2022.
Yields on the second series of $81.6 million ranged from 0.63% with a 3% coupon in 2015 to 4.35% with a 5% coupon in 2029. Bonds maturing in 2014 were offered via sealed bid. The bonds are callable at par in 2019 except for bonds maturing between 2019 and 2022. Bonds maturing in 2028 and 2029 are callable at par in 2022. Yields were lowered between five and 10 basis points on bonds maturing between 2015 and 2018 from retail pricing.
In the competitive market, JPMorgan won the bid for $435 million of triple-A rated Maryland general obligation state and local facilities loan. Yields ranged from 1.04% with a 5% coupon in 2017 to 3.81% with a 4% coupon in 2028. The bonds are callable at par in 2021. Bonds with 5% coupons were priced right on Tuesday' Municipal Market Data triple-A scale except for bonds maturing between 2021 and 2024 which had yields three to five basis points above the scale.
Barclays won the bid for $200 million of Connecticut GOs, rated Aa3 by Moody's and AA by Standard & Poor's and Fitch.
Yields ranged from 0.48% with a 5% coupon in 2015 to 4.50% with a 4.375% coupon in 2033. The bonds are callable at par in 2023.
Tuesday, yields on the Municipal Market Data scale ended as much as eight basis points weaker. The 10-year yield increased five basis points to 2.72% and the 30-year yield rose eight basis points to 4.23%. The two-year finished steady at 0.43% for the fifth consecutive session.
Yields on the Municipal Market Advisors scale ended as much as nine basis points higher. The 10-year yield increased five basis points to 2.90% and the 30-year yield rose nine basis points to 4.31%. The two-year was steady at 0.53% for the fifth session.
Treasuries continued to weaken Wednesday. The benchmark 10-year yield jumped 10 basis points to 2.61% and the 30-year yield rose nine basis points to 3.67%. The two-year yield rose five basis points to 0.36%.