NEW YORK – The tax-exempt market was quieter Thursday morning as traders recovered from the influx of deals that priced earlier in the week. Two of the week’s biggest deals are expected to price for institutional investors later Thursday morning.
“It’s a little quiet this morning but feels firm,” said a trader in New York. “People are waiting on their allotments. It was a big new issue week and the new issue calendar was absorbed pretty well considering we didn’t get a big backup in the market. With the size of the calendar we had a lot of people were expecting it to back up. So there is decent demand for new issues.”
He added the market should be able to get through supply the rest of today considering that next week’s calendar is very slim due to the Thanksgiving holiday.
The $1.32 billion New Jersey Transportation Trust Fund Authority deal that priced Wednesday was “well subscribed for,” he said, adding that yields were bumped up a couple of basis points.
Yields were mixed Thursday morning, according to the Municipal Market Data scale. Inside the 12-year spot, yields fell up to three basis points. Yields on credits maturing in 2024 and 2025 were steady. Yields rose up to one basis points on 15- to 18-year maturities. Yields were steady beyond 2030.
On Wednesday, yields closed flat across the curve, putting the 10-year and 30-year at 2.33% and 3.81%, respectively. The two-year closed flat for its eleventh consecutive trading day at 0.42%.
Treasuries were weakening in early Thursday trading. Yields were up one basis point across the curve, pushing the two-year yield to 0.27%, the 10-year to 2.02%, and the 30-year to 3.05%.
In the primary market, Bank of America Merrill Lynch is expected to price for institutional investors $1.3 billion of Hawaii general obligation bonds, following a two-day retail order period.
Barclays Capital is expected to price for institutional investors $787.6 million of Minnesota Tobacco Securitization Authority tobacco settlement revenue bonds following Wednesday’s retail order period.
In the competitive market, triple-A rated Westchester County, N.Y., will auction $200 million of general obligation bonds in three pricings. The first pricing will be $145.84 million, followed by $29.9 million, and $24.26 million.
Economic news was positive Thursday. Initial jobless claims fell 5,000 to 388,000 in the week ended Nov. 12, the Labor Department reported Thursday, beating economists’ expectations. The four-week moving average for initial claims was 396,750, down from the previous week's revised average of 400,750.
“The evidence continues to [show] that economic activity is firming in the fourth quarter,” wrote economists at RDQ Economics. “We believe this decline could be heralding a pickup in the pace of job creation. While we do not yet expect to see such a strong reading on job creation for November, we do expect the report to show a pickup in employment growth along with a continued pattern of upward revisions to the prior two months.”
Housing starts fell 0.3% to a seasonally adjusted annual rate of 628,000 in October, which was better than expected. They fell from a revised 630,000 in September, the Commerce Department said.
“Both housing starts and building permits were above expectations in October and we saw modest gains in the less volatile single-family sector,” wrote economists at RDQ Economics. “Our view is that housing starts and construction will show slight gains over the next year but too small to add significantly to overall economic activity. However, the half-full version of this is that we do not see housing construction as a drag on activity going forward.”
