Trading in the municipal market picked up Thursday after a slow week, traders said, as new deals were met with strong demand and secondary bonds traded firmer.
"It's very active today with lots of secondary offerings out there and prices coming in a little bit," one portfolio manager in New York said in an interview. "The past few days it's been very difficult but the new deals all have come very tight."
Trading was slightly above the 100-day average, according to Bloomberg data, with $4.47 billion in trades by midday Thursday.
J.P. Morgan's $646.5 million of Energy Northwest bonds stood out among new issuances, the traders said. The deal was significantly oversubscribed and was afforded repricing in the primary market.
"It was a relatively new name that attracted a lot of attention," the trader said. "You had a lot of frequent issuers as well who came this week, with New York City's transitional finance deal and metropolitan transportation bonds."
Wells Fargo Securities' $500 million of Metropolitan Transportation Authority bonds were offered with yields ranging from 0.28% with a 4% coupon in 2014 to 4.28% with a 5 % coupon in 2044. The bonds are rated A2 by Moody's Investors Service, A-plus by Standard & Poor's and A by Fitch Ratings.
Municipal bonds firmed Thursday morning even as the U.S. government announced jobless claims in the week ended April 5 plunged by the most in at least 10 years.
Initial jobless claims slumped 32,000 to 300,000 in the week ended April 5, the Labor Department said Thursday, bringing the four-week average of claims down 4,750 to 316,250. Economists polled by Thomson Reuters expected 320,000 initial claims.
Both munis and Treasuries gained in value through the morning.
Yields on munis fell as much as five basis points, according to Municipal Market Data. Maturities between 2019 and 2024 strengthened the most, with bonds maturing from 2017 to 2044 firming by between two and four basis points.
"I don't really consider the week-to-week numbers so much as the larger trend," Brian Rehling, a fixed income strategist at Wells Fargo Advisors, said in an interview. "It's encouraging that we're starting to see things look better there, but I don't think it's time to say that we're out of the woods yet."
The market may instead be responding to Federal Open Market Committee minutes that preceded a rally of three basis points in the muni market Wednesday.
"I think the FOMC minutes made it clearer that things are likely be pretty dovish for a fairly long period of time," Rehling said. "I thought they were fairly dovish in terms of long-term policy, focusing the market back on the long-term."
Treasury yields also fell, with the 10-year bond sliding three basis points to 2.67% and the 30-year by two basis points to 3.55%. The two-year note was unchanged at 0.37% following a four basis-point drop Wednesday.
Yields on $517.7 million of the J.P. Morgan-led Energy Northwest revenue and refunding bonds ranged from 0.40% with a 3% coupon in 2016 to 3.82% with a 5% coupon in 2040. The $26 million of refunding bonds were priced to yield 0.15% with a 2% coupon in 2015. The deal was rated Aa1 by Moody's, AA-minus by S&P and AA by Fitch.
Siebert Brandford Shank & Co. will bring a two-part deal totaling $415.5 million of lease revenue bonds on Thursday for the state of California following a retail period Wednesday.
In the competitive market, Bank of America won the bid for $250 million of Illinois general obligation bonds with a TIC of 4.0816%. Yields on the bonds ranged from 0.60% with a 5% coupon in 2015 to 4.54% with a 5% coupon in 2039.
"The competitive Chicago GO is attractive," a trader in Chicago said in an interview Monday.
With reporting from Maria Bonello and Hillary Flynn
