NEW YORK — Bond issuers may not be pleased with the concessions on this week’s supply, but the deals are getting done, traders report.
Investors, though, are in a good place to take advantage at these prices, a trader in Chicago said.
“Investors are taking advantage of spread levels that we haven’t seen before, at least since 2008,” he said. “This is prime buying time, if you have money. And if you’ve had a portfolio over the last few years, those people are just thrilled.”
Tax-exempt yields are primed for another day of significant increases, again, particularly around the 10-year range, according to the Municipal Market Data scale. Yields are flat to four basis points weaker up to three years.
Yields for four- to eight-year issues are up four to seven basis points. From nine to 17 years, they’re eight to 17 basis points higher. Beyond 17 years they’re three to nine basis points higher.
The 10-year muni yield surged 15 basis points Wednesday to 2.44%. It has risen 47 basis points from its record-low yield of 1.97% on Sept. 23.
The 30-year yield jumped eight basis points to 3.62%. The two-year yield leapt what was, for it, an Olympian five basis points to 0.39%.
Treasury yields continue to rise into the afternoon, as well. The benchmark 10-year Treasury yield has jumped eight basis points to 1.97%.
The 30-year yield has also risen eight basis points to 2.94%. The two-year yield ticked up one basis point to 0.27%.
Weakening yields have consequences, according to MMD analyst Randy Smolik. “Along with these meaningful technical targets being reached, participants are also talking about [how] the backup in yields can slow the refunding pipeline of deals,” he wrote in a mid-morning research post. “The 30-day visible has dropped over $4 billion from [Wednesday], to $7.8 billion [Thursday] from $12.5 billion [Wednesday].”
In total, $8.26 billion of new issuance is expected to reach the primary market this week. Last week, the market saw a revised $7.69 billion in new supply.
On the competitive side of the market Thursday, Bank of America Merrill Lynch won $115 million of University System of Maryland auxiliary facility and tuition revenue bonds. The bonds were rated Aa1 by Moody’s Investors Service and AA-plus by Standard & Poor’s and Fitch Ratings.
Yields ranged from 0.49% with a 3.00% coupon in 2013 to 4.00% priced at par in 2029. All credits maturing between 2012 and 2031, except in 2013, 2025, 2026, and 2029, were sold, but not available.
