NEW YORK – The tax-exempt market activity is slowing down this week, but some traders are looking ahead to next week when billions of dollars of reinvestment money will flood the market.
“Everyone thought we’d have a full day today but I’m not sure we’ll see a full day of business,” said a trader in Chicago. “But there are still a couple things that are trading.”
He added traditional credits and structures are still in demand. “Some of my retails with a 5% coupon and a 10-year call provision are better and are trading,” he said. “But things that are a little dicey in terms of credit and structure are not.”
While business may be slowing down ahead of Thanksgiving, there is a lot to look forward to after the holiday. “On December 1, almost $30 billion is coming due,” the trader said. “And most of the big states are represented with $1 billion. So there is money out there and money to be put to work. But it’s still very selective.”
Munis were mostly steady Tuesday morning after a slight rally Monday, according to the Municipal Market Data scale. Yields were flat across the curve, except for yields on the six- to 11-year spots which fell one basis point.
On Monday, the two-year muni closed flat at 0.42% for its 14th consecutive trading session. The 10-year yield finished down three basis points to 2.23% and the 30-year yield closed down two basis points to 3.75%.
Treasuries continued their rally from Monday, gaining several basis points in Tuesday morning trading. The two-year yield and the benchmark 10-year yield were each down one basis point to 0.27% and 1.96%, respectively. The 30-year yield fell two basis points to 2.94%.
In the primary market, Loop Capital Markets is expected to price $213 million of University of Connecticut general obligation bonds following two days of retail pricing. The credit is rated Aa2 by Moody’s Investors Service, AA by Standard & Poor’s and AA-minus by Fitch Ratings.
In the second day of retail pricing Monday, yields on the first series, $180.4 million of GOs, ranged from 0.40% with 2%, 3%, and 5% coupons in a 2013 split maturity to 3.75% and 3.71% with 3.75% and 5% coupons in a 2030 split maturity. Debt maturing in 2012 was offered via sealed bid. Credits maturing in 2023, 2025, 2027 to 2029, and 2031 were not offered for retail. The bonds are callable at par in 2021.
Yields on the second series, $32.6 million of refunding GOs, ranged from 0.20% with a 1.5% coupon in 2012 to 2.80% with a 5% coupon in 2023. The bonds are callable at par in 2021.
Wells Fargo is expected to price for institutions $172.5 million of Westchester County Health Care Corp. revenue bonds in two pricings, consisting of $107.8 million of Series 2000 A senior lien bonds and $64.7 million of Series 2011 senior lien bonds. The credit is rated A3 by Moody’s and BBB by Standard & Poor’s.
On Monday, Wells Fargo held a retail order period. The $107.8 million of senior lien bonds yielded 4.01% with a 5% coupon in 2021, 4.17% with a 5% coupon in 2022, and 4.33% with 4% and 5% coupons in a 2023 split maturity. Credits maturing between 2024 and 2030 were not offered for retail. The debt is callable at par in 2021.
Within the $64.7 million series, $49.4 million of Series 2011 A and $15.4 million of Series 2011 B bonds were offered.
Yields on the first series ranged from 1.35% with a 2% coupon in 2012 to 5.11% with a 5% coupon in 2030. Debt maturing in 2041 was not offered for retail. Credits on the second series were not offered for retail. The debt is callable at par in 2021.
RBC Capital Markets is expected to price $163.5 million of School District of Philadelphia GOs. The bonds are rated Aa2 by Moody’s, A-plus by Standard & Poor’s, and AA by Fitch. The bonds consist of $146.3 million of federally taxable qualified school construction bonds and $17.2 million of tax-exempt bonds.
In economic news, gross domestic product increased at an annual rate of 2.0% the preliminary third quarter report by the Commerce Department showed. The gain is less than the advance reading of 2.5% growth, but higher than the 1.3% reported for the second quarter.
“The U.S. economy didn't grow quite as quickly as initially estimated, with the revisions to the GDP report suggesting that we are getting less momentum from domestic demand,” wrote Jennifer Lee, senior economist at BMO Capital Markets, adding, however, that it was the ninth consecutive quarterly improvement.
