As traders waited for the over $2 billion California deal to price for institutions Thursday, they turned their attention to the secondary.
One trader said there were a lot of bonds in the secondary, pushing the market lower.
"It's down a touch," a New York trader said. "It's due to supply. There are lots of bonds in the secondary."
Still, other traders said that while yields have been increasing slowly over the past few days, bonds haven't weakened enough to provide real value. "I like kicker bonds and those are in high demand and it's hard to find stuff that represents any value," a second New York trader said. "Right now I am focused on the secondary because the primary is not giving me the structure I like."
He added that in the primary, he is finding big premiums or a low coupon bond at par. "It's hard to find value and a few basis points here or there do not have a big impact. It's business as usual but not in a fun way."
In the primary market Thursday, Bank of America Merrill Lynch and Morgan Stanley are expected to price for institutions $2.1 billion of California various purpose general obligation bonds, rated A1 by Moody's Investors Service, A by Standard & Poor's, and A-minus by Fitch Ratings.
In retail pricing Wednesday, yields on the first series of $1.25 billion ranged from 0.65% with a 5% coupon in 2016 to 4% priced at par in 2043. Bonds maturing in 2013 were offered via sealed bid. Portions of credits maturing in 2037 and 2043 were not offered for retail. The bonds are callable at par in 2023.
Spreads on bonds with 5% coupons maturing between 2016 and 2022 ranged from 23 basis points to 62 basis points above Tuesday's Municipal Market Data scale.
Yields on the second series of $802 million of refunding bonds ranged from 0.65% with 3% and 4% coupons in a split 2016 maturity to 3.61% with a 3.5% coupon in 2030. Credits maturing between 2013 and 2015 were offered via sealed bid. Portions of bonds maturing between 2024 and 2033 were not offered for retail. The bonds are callable at par in 2023 except for those maturing in 2023, and bonds maturing in 2024 and 2029, which are callable at par in 2018.
Bonds with a 5% coupon maturing in 2024 and 2029 were priced right on the MMD scale but have a five-year call.
Morgan Stanley is expected to price $750 million of California Health Facilities Financing Authority revenue bonds for Sutter Health. The bonds are rated Aa3 by Moody's and AA-minus by Standard & Poor's and Fitch. The sale includes $450 million of tax-exempt bonds and $300 million of taxable bonds.
Municipal bond scales ended as much as three basis points weaker Wednesday and a slightly lower session Tuesday.
Yields on the Municipal Market Data triple-A GO scale as much as three basis points higher. The 10-year yield increased two basis points to 1.74% and the 30-year yield jumped three basis points to 2.97%. The two-year closed steady at 0.29% for the fourth session.
Yields on the Municipal Market Advisors 5% coupon triple-A benchmark scale also ended as much as three basis points higher. The 10-year and 30-year yields rose one basis point each to 1.80% and 3.06%, respectively. The two-year was steady at 0.32% for the fourth session.
Treasuries were slightly stronger Thursday morning after posting losses earlier in the week. The benchmark 10-year and 30-year yields fell two basis points each to 1.79% and 2.99%, respectively. The two-year was steady at 0.23%.
In economic news, initial jobless claims fell 42,000 to 346,000 in the week ending April 6. The drop was larger than expected by economists.
"It would appear that the late-March surge in claims was related to seasonal adjustment issues around the Easter/Passover holiday, which should ease concerns that job growth may be faltering," wrote economists at RDQ Economics. "Initial claims rose by 47,000 over the prior two weeks and then fell by 42,000 in the latest week. The bulge in claims will keep the four-week average elevated for another two weeks but even at 358,000 the average is below the level seen during the February and January payroll survey weeks."