NEW YORK – The tax-exempt market is staying focused on the primary as several deals in Massachusetts, New York City, and Texas are on the forefront of traders’ minds.
“Retail has pretty much been involved and the Austin deal is pricing attractively and should do well,” said a trader in Dallas, referring to the $235.4 million Austin water and wastewater revenue deal First Southwest is expected to price Tuesday. “And because of the size and quality, it brings in crossover buyers. There are not a lot of coupons that are priced for retail but the ones that are should do plenty of business.”
The trader added the muni market might have to give up a little yield because of the amount of supply coming, but the concession shouldn’t be too large because of the types of deals. “Especially those billion dollar plus deals – the market is bringing in crossover buyers and won’t need much of a give. There are not a lot of places to put their money.”
The Municipal Market Data scale was not updated by press time. On Monday, the two-year muni closed flat at 0.42% for the ninth consecutive trading session. The 10-year yield closed up three basis points to 2.28% and the 30-year finished up five basis points to 3.78%.
Treasuries were up in Tuesday morning trading as yields fell slightly across the curve. The two-year yield was steady at 0.24%. The 10-year benchmark and the 30-year yield were each down one basis point to 2.03% and 3.07%, respectively.
In the primary market, Barclays Capital is expected to price for institutional investors $450 million of New York City Municipal Water Finance Authority water and sewer revenue bonds. The bonds are rated Aa2 by Moody’s Investors Service and AA-plus by Standard & Poor’s and Fitch Ratings.
On Monday, Barclays priced the bonds for retail. A 2039 split maturity yielded 4.2% with coupons of 4.125% and 5%. Debt maturing in 2044 was not offered for retail. The bonds are callable at par in 2021.
Siebert Brandford Shank & Co. is expected to price $266.3 million of North Texas Tollway Authority System first tier revenue refunding bonds. The bonds are rated A2 by Moody’s and A by Standard & Poor’s.
Barclays is also the bookrunner on $244 million of Guam business privilege tax bonds. The credits are rated A by Standard & Poor’s and A-minus by Fitch.
In the competitive market, Massachusetts is expected to auction $1.2 billion of general obligation revenue anticipation notes– each $600 million. The notes are rated M1G1 by Moody’s, SP-1-plus by Standard & Poor’s and F1-plus by Fitch.
Triple-A rated Baltimore County, Md., is expected to auction $255 million of metropolitan district bonds.
New Mexico is also expected to come to market with $122.14 million of severance tax refunding bonds. The credits are rated Aa1 by Moody’s, and AA by Standard & Poor’s.
In economic news, retail sales were up 0.5% in October, more than double the estimated 0.2% rise. Excluding autos, retail sales were up 0.6% in October, the highest gain since March 2011, the Commerce Department reported Tuesday.
Commenting on the retail sales report, Jennifer Lee, senior economist at BMO Capital Markets, asked, are “Santa and his elves shopping earlier these days?” Since the range of sales was broad based, including electronics, sporting goods, and Internet-based shopping, she noted, all “are discretionary items, meaning they are ‘wants,’ not ‘needs’…This is undeniably an encouraging report.”
The October producer price index fell 0.3%. Over the past year, prices have increased 5.9%. The annualized producer price index rate increased to 2.8% from 2.5% in September.
