The municipal market was at pains to come up with a proper reaction to the large new deals that washed over it in a hazy tide.
The market had much to consider. The primary saw one deal arrive with concessions while another rolled in with tight pricing; Treasuries danced a couple of steps up in the morning and a couple of steps back in the early afternoon; secondary activity was mostly muted.
When all was said and done, the Municipal Market Data scale left tax-exempt yields flat on the day’s session. But the muni market seems strong, in all consideration, a trader in Chicago said.
“The market feels firm,” he said. “The deals all did well; I think the paper cleared nicely. The market’s poised for more supply, if the supply comes.”
The benchmark 10-year muni yield Wednesday held at 2.45%. It sits 48 basis points above the record low it held on Sept. 23.
The 30-year yield remained at 3.69%. The two-year yield hovered at 0.45% for a sixth consecutive session.
Treasury yields ended Wednesday’s session decidedly mixed. The benchmark 10-year Treasury yield slipped one basis point to 2.17%. The 30-year ticked up one basis point to 3.18%. The two-year yield 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 of 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% 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 Sachs also priced $205 million of California taxable various-purpose GOs. Credits maturing in 2013 were offered in a sealed bid.
Yields ranged from 2.07% with a 2.125% coupon in 2014 to 2.67% and 2.92% priced at par in 2015 and 2016, respectively. They were 160 basis points over the comparable Treasury in 2014, 162.5 basis points over the comparable Treasury in 2015, and 187.5 basis points over the comparable Treasury in 2016.
California reported that retail investors ordered roughly $472 million of bonds from the $2 billion sale. Orders during the two-day retail order period included $386.7 million of tax-exempt bonds and $85.3 million of taxable bonds, the state reported.
Tax-exempt orders equaled 21.5% of the $1.8 billion tax-exempt component; taxable orders represented 42.6% of the $200 million taxable piece. The $472 million of combined retail orders represented 23.6% of the total $2 billion offering.
JPMorgan priced $1 million of New York City’s Hudson Yards Infrastructure Corp. senior revenue bonds. The bonds were rated A2 by Moody’s and A by Standard & Poor’s and Fitch.
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%.
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.
Goldman Sachs and Barclays Capital teamed up to price $500 million of Ohio State University general receipts taxable bonds with 100-year maturities — a so-called century bond.
The bonds are rated Aa1 by Moody’s and AA by S&P and Fitch. They were priced at 35 basis points over the comparable Treasury, yielding 4.85% with a 4.80% coupon in 2111.
In the competitive space, Wells Fargo Securities won $145 million of Milwaukee school revenue anticipation notes. The notes were rated MIG-1 by Moody’s, SP-1-plus by Standard & Poor’s, and F1-plus by Fitch.
The notes mature in 2012, with a 1.50% coupon. They were not formally reoffered.
In economic news, the Labor Department reported Wednesday that consumer prices increased 0.3% in September. At the same time, the core rate grew 0.1%, nearly in line with economists’ expectations.
Economists polled by Thomson Reuters anticipated rises of 0.3% in the consumer price index and 0.2% in the core rate.
Higher costs in energy and food categories fueled the increase in the overall price index. Gas prices and electricity costs also rose.
The food-at-home category rose for the third consecutive month. And there were no reported decreases in any major grocery store food group index.
Also, the Commerce Department reported Wednesday that the pace of housing starts soared 15.0% in September to a 658,000 seasonally adjusted annual rate. This ranks well above expectations, and represents the strongest pace since April 2010.
A 51.3% rise in multifamily building spurred the September leap in housing starts.
