The municipal market was firmer by up to five basis points yesterday, with moderate activity in the secondary market and some of the last sizeable new issues of the week pricing in the primary market.
Traders said tax-exempt yields were lower by three to five basis points.
"We started out kind of meandering around a bit, but we ended up clearly firmer," a trader in New York said. "I'd say we're showing gains of a good three basis points on the whole, maybe a little more, maybe a little less depending on how many years out you go. But the tone out there is positive, some business was getting done, and it's another firmer day."
Also yesterday, The Bond Buyer's one-year note index fell 14 basis points on the week to 0.65%, which is an all-time low for the index that was launched in July 1989.
Trades reported by the Municipal Securities Rulemaking Board yesterday showed gains. A dealer sold to a customer California 6s of 2035 at 6.05%, down three basis points from where they traded Tuesday. A dealer sold to a customer Fort Worth, Tex. 5.25s of 2025 at 4.79%, four basis points lower than where they were sold Tuesday. A dealer bought from a customer New York's Metropolitan Transportation Authority 5s of 2025 at 5.27%, five basis points lower than where they traded Tuesday. A dealer sold to a customer Illinois Finance Authority 6s of 2039 at 6.18%, down two basis points from where they were sold Tuesday.
A dealer sold to a customer New York City Transitional Finance Authority 5.5s of 2026 at 3.14%, one basis point lower than where they traded Tuesday. A dealer sold to a customer Arizona Health Facilities Authority 5.5s of 2038 at 5.49%, down one basis point from where they were sold Tuesday. Bonds from an interdealer trade of Texas Water Development Board 5s of 2024 yielded 3.45%, one basis point lower than where they traded Tuesday. Bonds from an interdealer trade of insured Massachusetts Water Resources Authority 5s of 2024 yielded 4.47%, down three basis points from where they were sold Tuesday.
"Early on, there were little patches of firmness in what was an overall unchanged market, but I think we're solidly better at this point" a trader in Los Angeles said. "I would say we cheapened up maybe three, four basis points. I don't think any more than that, but maybe a little less in spots."
In the new-issue market yesterday, Merrill Lynch & Co. priced $302.5 million of tax-exempt and taxable general obligation bonds for Michigan in three series. Bonds from a $65.6 million tax-exempt series mature from 2021 through 2025, with yields ranging from 5% with a 5.5% coupon in 2021 to 5.62% with a 5.5% coupon in 2025. The bonds are callable at par in 2019. The deal also contains a $33.6 million taxable series, which matures in 2011, yielding 4.635% with a 4.6% coupon, and a $203.3 million taxable series, which matures from 2015 through 2017, and in 2019 and 2020, with yields ranging from 5.89% with a 5.875% coupon in 2015 to 7.00% with a 6.95% coupon in 2020. The credit is rated Aa3 by Moody's Investors Service and AA-minus by Standard & Poor's and Fitch Ratings.
Morgan Stanley priced $256.2 million of revenue refunding bonds for the New Jersey Educational Facilities Authority for the state's University of Medicine and Dentistry. The bonds mature from 2012 through 2020, with term bonds in 2023 and 2032. Yields range from 4.80% with a 5.25% coupon in 2012 to 7.80% with a 7.5% coupon in 2032. The bonds, which are callable at par in 2019, are rated Baa2 by Moody's and BBB-plus by Fitch.
The Port Authority of New York and New Jersey competitively sold $85.7 million of consolidated bonds to Citi, with a true interest cost of 2.78%. The bonds mature from 2010 through 2019, with coupons ranging from 1.25% in 2010 to 3.5% in 2019. None of the bonds were formally re-offered. The bonds, which are not callable, are rated Aa3 by Moody's and AA-minus by both Standard & Poor's and Fitch.
Morgan Stanley also priced $80 million of water facility revenue bonds for the Pennsylvania Economic Development Financing Authority. The bonds mature in 2039, yielding 6.20% priced at par. The bonds, which are callable at par in 2019, are rated Aa3 by Moody's and A by Standard & Poor's.
On tap today, Alaska will competitively sell $165 million of GOs. The bonds are slated to mature from 2010 through 2029 and will be callable at par in 2019. The credit is rated Aa2 by Moody's, AA-plus by Standard & Poor's, and AA by Fitch.
The Treasury market mostly showed gains yesterday. The yield on the benchmark 10-year note, which opened at 2.66%, was quoted near the end of the session at 2.65%. The yield on the two-year note was quoted near the end of the session at 0.82% after opening at 0.81%. The yield on the 30-year bond, which opened at 3.53%, was quoted near the end of the session at 3.50%.
As of Tuesday's close, the triple-A muni scale in 10 years was at 117.5% of comparable Treasuries, according to Municipal Market Data. Additionally, 30-year munis were 134.7% of comparable Treasuries. Also, as of the close Tuesday, 30-year tax-exempt triple-A rated GOs were at 148.5% of the comparable London Interbank Offered Rate.
In economic data released yesterday, the Institute for Supply Management's business index gained to 36.3 in March from 35.8 in February. Economists polled by Thomson Reuters predicted the index would rise to 36.0.
Meanwhile, spending on construction projects fell 0.9% to a seasonally adjusted annual rate of $967.5 billion in February. The overall decrease, which was smaller than the 1.6% decrease projected by Thomson, followed a revised January level of $976.2 billion, a 3.5% decline from the prior month.
