A plummeting stock market thrusting the 10-year Treasury bond yield below 2.00% dominated headlines on Wednesday morning, giving issuers in the primary-heavy market even lower borrowing costs than they had expected.
While double-A rated, the state of Washington various purpose general obligation refunding deal priced right along the Municipal Market Data triple-A 5% curve in a true testament to the day's strength. Rated Aa1 by Moody's Investors Services and AA-plus by Standard & Poor's and Fitch Ratings, the deal was priced to yield from 0.08% on a 4% coupon in 2015 to 2.52% on a 5% coupon in 2032, according to data provided by Ipreo.
The deal priced right along the MMD curve through its 2024 maturities, then offered a slim 10 basis point spread from 2027 through 2032, according to data from TM3 and Ipreo. There is an optional call feature in January 2025 at par.
Bank of America Merrill won the bid this morning. Yields on the 10-year Treasury slipped below 2.00% at around 9:30 a.m., Wednesday morning, panicking investors and putting even more interest into municipals.
"They go hand in hand," said a Midwest-based trader. "It's hard to extract the two, especially when you see such dramatic movement."
By 1 p.m., the two-year had fallen 11 basis points to yield 0.28% compared to Tuesday's market close. The 10-year plunged to 1.99%, a 22 basis point drop from Tuesday, and the 30-year fell 17 basis points to 2.78%.
Municipal scales echoed the strength, the MMD triple-A 5% curve firming in response. Bonds maturing between 2022 and 2044 slid eight to 12 basis points, while those maturing between 2018 and 2021 fell two to eight basis points. Bond maturing from 2015 through 2017 fell up to three basis points.
