NEW YORK — The large new issues have landed in the primary market, arriving with a mixture of concessions and aggressive pricing. But heavy trading in the secondary earlier in the week has made life difficult for investors seeking product at current market rates, traders say.
“We’re in vulnerable position,” a trader in Chicago said. “We’re being thrown around by what’s going on over in Greece, and Treasuries. And we don’t have a whole lot in the secondary … priced at current market levels.”
There is relatively heavy activity in the secondary, nonetheless, he added. But even with the bid-wanted lists, traditional secondary bonds are hard to find.
“Consequently, we’ll probably hold up better than Treasuries at this point,” the trader said.
The Municipal Market Data scale had yet to update tax-exempt yields at press time. Earlier in the day, they were steady across the curve.
The benchmark 10-year muni yield dropped eight basis points Tuesday to 2.45%. It sits 48 basis points above the record low it held on Sept. 23.
The 30-year yield fell two basis points to 3.69%. The two-year yield remained at 0.45% for a fifth consecutive session.
Treasury yields started Wednesday’s session slightly weaker, only to firm heading into the afternoon. The benchmark 10-year Treasury yield has fallen two basis points to 2.16%.
The 30-year has ticked down one basis point to 3.16%. The two-year yield has held steady at 0.28%.
The industry estimates the municipal bond market should see $6.7 billion in new issuance this week. Last week’s number was revised downward to $4.5 billion.
Three deals in particular, two negotiated and one competitive, are expected to provide a disproportionate share of the volume.
Goldman, Sachs & Co. paced 28 other firms on pricing for $1.8 billion California general obligation bonds. The bonds, rated A1 by Moody’s Investors Service and A-minus by Standard & Poor’s and Fitch Ratings, are expected to set the tone of the market this week.
Yields ranged from 1.33% with coupons of 3.00%, 4.00%, and 5.00% and in multiple maturities in 2014 to 5.03% and 5.032% with coupons of 4.75% and 5.00% in a split maturity in 2041. The bonds were priced 18 basis points higher than retail at the two-year range, nine basis points higher at the 10-year, and 16 basis points higher at the 30-year.
The deal saw no pricing concessions between the two days of the retail order period.
Goldman also led the same group of underwriters in pricing $205 million of California taxable various purpose GOs. Credits maturing in 2013 were offered in a sealed bid.
Yields ranged from 160 basis points over the comparable Treasury in 2014 to 187.5 basis points over the comparable Treasury in 2016.
JPMorgan priced $1 million of Hudson Yards Infrastructure Corporation senior revenue bonds. The bonds mature in 2047 with $650 million with a 5.75% coupon yielding 5.10%, $300 million priced at par to yield 5.25% and $50 million wrapped by Assured Guaranty Municipal Corp. priced at par to yield 5.00%. The bonds are rated A2 by Moody’s, and A by Standard & Poor’s and Fitch.
Yields fell five and eight basis points at repricing. The Hudson Yards deal’s prices came in “at stronger levels than indications” Tuesday, according to MMD analyst Randy Smolik.
