NEW YORK — The municipal market is plodding along Wednesday afternoon with solid interest in the week’s new issuance, but few bid-wanteds in the secondary.
Negative economic indicators and persistent trouble in the Euro zone have Treasury yields ricocheting between moderate gains and losses. Consequently, bids in the muni secondary have been scarce, a trader in New Jersey said.
“The muni market has been lackluster,” he said. “Bids here have really dried up. And without bids, there’s very little activity.”
The market, crossing into the afternoon, is mostly firming, according to the Municipal Market Data scale. Bonds at the short end of the curve and from 2023 to 2035 are holding steady. Those maturities in 2018 through 2022 and from 2036 to 2041 are flat to two basis points lower.
Munis yields dropped across most of the curve to close out Tuesday’s trading sessions. The 10-year muni yield slid three basis points to 2.23%, its lowest since Sept. 2.
The 30-year muni yield fell two basis points to 3.86%, its lowest level since Nov. 1. And the two-year muni yield stayed at 0.30%, its lowest yield in more than two years.
Treasury yields, after starting the day slightly softer, have firmed noticeably everywhere but at the short end of the curve. The benchmark 10-year Treasury yield crossed noon down five basis points at 2.18%.
The 30-year yield has fallen seven basis points since Tuesday’s close to 3.60%. The two-year yield continues to hold steady at 0.20%, as it did all Tuesday, two basis points above its all-time low.
The amount of new issuance this week is expected to more than double last week’s total. Volume should rise to around $5.28 billion from the slight $2.25 billion of municipal bond sales seen last week, according to industry estimates. Two huge negotiated deals that Morgan Stanley has priced account for a large portion of the pie.
The firm priced for retail $967.4 million of Indiana Finance Authority wastewater utility revenue bonds in three series. The bonds are rated A1 by Moody’s Investors Service and AA by Standard & Poor’s.
Yields for the first series, $653.5 million of first lien wastewater utility revenue bonds, series 2011A, range from 0.60% with a 2.00% coupon in 2012 to a 5.00% coupon priced at par in 2041 in a split maturity. Debt maturing in 2023 through 2025, 2031, 2038, and a 2041 split maturity are not offered for retail.
The second series, $267.8 million of second lien wastewater utility revenue bonds, series 2011B, is rated A2 by Moody’s and AA-minus by Standard & Poor’s. Yields range from 1.25% with a 5.00% coupon in 2014 to 4.43% with a 5.25% coupon in 2026.
Credits maturing in 2023 through 2025, 2031, and 2041 are not offered for retail.
The third series, $46.1 million of second lien wastewater utility revenue bonds, series 2011C, which is also rated A2 by Moody’s and AA-minus by Standard & Poor’s, is not offered for retail.
In the competitive market, Wells Fargo Securities won $267 million of Louisville and Jefferson County Metropolitan Sewer District, Ky., sewer and drainage system revenue bonds. The bonds are rated Aa3 by Moody’s and AA-minus by Standard & Poor’s and Fitch Ratings.
Yields range from 0.40% with a 3.00% coupon in 2012 to 4.35% with a 5.00% coupon in 2034. Credits maturing in 2013, 2014, and 2016 were not formally reoffered.
Traders have said that, with all of the cash still on the sidelines, the larger new deals have gotten a solid reception.
