The tax-exempt market continued to see a high volume of bids wanted surface Thursday morning, with dealers showing Detroit Public School bonds in the secondary. While the primary market was relatively quiet compared to earlier in the week, two large high-grade deals priced.
"There are lots of bid lists again," a New York trader said. "But it feels flat so there isn't an effect on the market yet."
This trader noted a dealer showed a bid for Michigan Finance Authority's Detroit Public School 4.375s of 2014 at $100.3, or a yield of 4.1%. On Tuesday, the bond priced at par.
In the primary market, Bank of America Merrill Lynch held preliminary pricing for $156.4 million of Dallas, Texas, waterworks and sewer system revenue refunding bonds, rated Aa1 by Moody's Investors Service and AAA by Standard & Poor's.
Yields ranged from 0.51% with a 5% coupon in 2015 to 4.72% with a 5% coupon in 2042. Bonds maturing in 2014 were offered via sealed bid. The bonds are callable at par in 2023.
Spreads on bonds with 5% coupons ranged from eight basis points to 35 basis points above Wednesday's Municipal Market Data scale.
Wells Fargo Securities priced $104 million of triple-A rated Charlotte, N.C., general obligation refunding bonds. Yields ranged from 0.46% with a 5% coupon in 2015 to 4.05% with a 4% coupon in 2029. Bonds maturing in 2014 were offered via sealed bid. The bonds are callable at par in 2023.
Spreads on bonds with 5% coupons ranged from three basis points to 15 basis points above Wednesday's MMD scale.
Wednesday, yields on the triple-A Municipal Market Data scale ended as much as four basis points higher. The 10-year yield rose three basis points to 2.93% and the 30-year yield increased four basis points to 4.44%. The two-year finished flat at 0.43% for the 26th straight session.
Yields on the Municipal Market Advisors scale ended as much as three basis points higher. The 10-year yield rose two basis points to 3.07% and the 30-year yield increased three basis points to 4.54%. The two-year was flat at 0.55% for the fifth session.
Treasuries were mostly flat Thursday morning after a weaker session Wednesday following the Federal Open Market Committee meeting minutes. The two-year and 30-year yields were flat at 0.38% and 3.90%, respectively. The benchmark 10-year yield rose one basis point to 2.89%.
In economic news, initial jobless claims rose 13,000 to 336,000 in the week ended Aug. 17, slightly above the 330,000 level expected by economists.
"The four-week average of initial jobless claims is now at its lowest level since mid-November 2007 and these data continue to signal that the job market is improving," wrote economists at RDQ Economics. "When Chairman Bernanke was advocating QE3 at the Jackson Hole conference a year ago, the four-week average of claims was some 40,000 higher. In our view, these claims data suggest a significantly reduced chance that the August jobs report will be weak enough to postpone an announcement on tapering bond purchases at the September FOMC meeting. We believe that they also point to a firming in economic growth in the third quarter."