Traders in the tax-exempt market gobbled up the high yields offered by Michigan Finance Authority in the first Detroit deal to price since the city’s bankruptcy filing July 18.
JPMorgan repriced $92 million of Michigan Finance Authority state aid revenue notes for the School District of Detroit, which yielded 4.375% priced at par maturing in August 2014. That is down from the 4.5% offered during preliminary pricing. The bonds are rated SP-1 by Standard & Poor’s. Traders in the tax-exempt market said the deal was very well received.
Other deals in the primary market had mixed reception, with underwriters lowering yields on the short-end of the curve, but raising yields on longer-maturing bonds.
Bank of America Merrill Lynch repriced the week’s largest deal, $849.2 million of the New Jersey Transportation Trust Fund Authority transportation program bonds. The bonds are rated A1 by Moody’s Investors Service and A-plus by Standard & Poor’s and Fitch Ratings.
Yields ranged from 0.68% with a 2.00% coupon in 2015 to 5.22% with a 5% coupon in 2044. The bonds are callable at par in 2023. Yields were raised two basis points on bonds maturing between 2022 and 2026 from preliminary pricing. Yields were lowered three basis points on bonds maturing in 2039 and 2044.
B of A Merrill also priced for institutions $302.4 million of triple-A rated Columbus, Ohio, general obligation bonds following retail pricing Monday.
Yields in the first series of $216.8 million of various purpose unlimited tax bonds ranged from 0.46% with a 5.00% coupon in 2015 to 4.53% with a 4.5% coupon in 2034. The bonds are callable at par in 2023. Yields were lowered between two and five basis points on bonds maturing between 2015 and 2018 from retail pricing Monday. Yields were raised as much as three basis points on bonds maturing between 2019 and 2024, and in 2034.
Yields in the second series of $85.6 million of various purpose limited tax bonds ranged from 0.46% with a 4.00% coupon in 2015 to 4.28% with a 4.125% coupon in 2029. The bonds are callable at par in 2023. Yields were lowered between two and five basis points on bonds maturing between 2015 and 2018 from retail pricing. Yields were raised as much as five basis points between 2019 and 2029.
In the secondary market, traders said investors continued to shorten duration of bonds and the market felt one to two basis points weaker on the long-end.
“We are seeing about 2,500-plus items on the bids wanted list,” in both odd-lots and block-size trades, a New York trader said. “Much of it is noise.”
“I am focusing on providing liquidity to accounts in the secondary space,” this trader said. “Rate volatility is a concern in the taxable space as we see the curve steepening. Accounts are shortening duration and moving towards defensive structures, which has been the case since the market unwind in June.”
Monday, yields on the triple-A Municipal Market Data scale ended as much as three basis points higher. The 10-year yield ticked up two basis points to 2.90% and the 30-year yield inched up one basis point to 4.40%. The two-year finished flat at 0.43% for the 24th straight session.
Yields on the Municipal Market Advisors scale also ended as much as three basis points higher Monday. The 10-year yield climbed two basis points to 3.04%; the 30-year yield also rose two basis points to 4.51%. The two-year was steady at 0.55% for the third session.
Treasuries were stronger Tuesday afternoon, though pared some gains from the morning session. The benchmark 10-year yield slid four basis points to 2.84% and the 30-year yield fell two basis points to 3.88%. The two-year yield fell one basis point to 0.35%.
