Tax-exempt yields backed up slightly Wednesday amid weakening Treasuries and the pricing of some of the week’s larger deals in the primary, one of which was downsized by close to $300 million.
Traders said tax-exempt yields were mostly higher by one or two basis points.
“There was some activity out on the Street, but the bulk of the attention was on the primary, as it’s been this entire week,” a trader in New York said. “Some of those issuers had to make some concessions to get their deals done, particularly that Ohio deal.”
JPMorgan priced $268.5 million of GO refunding bonds for Ohio in multiple series Wednesday in a deal downsized from $350.4 million during preliminary pricing earlier in the day and from the $540 million of debt offered to retail investors Tuesday. Additionally, many of the yields were raised by five to 10 basis points from the retail pricing, and then raised an additional one to four basis points from Wednesday’s during re-pricing.
Bonds from the $98.6 million series mature from 2015 through 2022, with yields ranging from 1.43% with a 5% coupon in 2015 to 3.01% with a 4.25% coupon in 2022.
This series was trimmed from $121.3 during re-pricing pricing. The bonds are not callable.
Bonds from the $128.1 million series mature from 2015 through 2022, with yields ranging from 1.43% with a 5% coupon in 2015 to 3.01% with a 5% coupon in 2022.
This series was trimmed from $176.5 during re-pricing. The bonds are not callable.
Bonds from the $16.0 million series mature from 2013 through 2020, with yields ranging from 0.74% with a 2% coupon in 2013 to 2.72% with a 2.5% coupon in 2020.
This series was trimmed from $26.8 during re-pricing. The bonds are not callable.
Bonds from the $25.8 million series mature from 2014 through 2019, with yields ranging from 1.07% with a 2% coupon in 2014 to 2.53% with a 4% coupon in 2019.
This series was not altered during re-pricing. The bonds are not callable.
The credit is rated Aa1 by Moody’s Investors Service and AA-plus by both Standard & Poor’s and Fitch Ratings.
“There’s been quite a bit of supply out there nationally this week and last and, with Treasuries off a little bit today, we ended up a little bit weaker,” a trader in Los Angeles said. “I’m not sure we’re off more than a couple basis points, but there’s definitely a softer tone out there.”
In Wednesday’s largest new issuance, Morgan Stanley priced $500 million of taxable Build America Bonds for Arizona’s Salt River Project Agricultural Improvement and Power District.
The BABs mature in 2041 and yield 4.839% priced at par, or 3.15% after the 35% federal subsidy. The bonds were priced to yield 115 basis points over the comparable Treasury yield.
The debt, which is subject to a make-whole redemption at Treasuries plus 20 basis points, is rated Aa1 by Moody’s and AA by Standard & Poor’s.
The Municipal Market Data triple-A scale yielded 2.34% in 10 years Wednesday, up two basis points from Tuesday’s 2.32%, while the 20-year scale edged up one basis point to 3.28%, up from Tuesday’s all-time low of 3.27%.
The scale for 30-year debt yielded 3.69%, one basis point higher than Tuesday’s 3.70%.
The 20-year low of 3.27% lasted one day before reverting to 3.28%, the scale’s previous record low. That record was originally set Aug. 31, and was matched Thursday, Friday, and Monday, before being broken Tuesday. Yields on the 10-year and 30-year triple-A scale bottomed out at 2.17% and 3.67%, respectively, on Aug. 25.
Wednesday’s triple-A muni scale in 10 years was at 93.6% of comparable Treasuries and 30-year munis were at 100.0%, according to MMD, while 30-year tax-exempt triple-A general obligation bonds were at 111.5% of the comparable London Interbank Offered Rate.
The Treasury market was weaker Wednesday. The benchmark 10-year note was quoted near the end of the session at 2.50% after opening at 2.47%.
The 30-year bond was quoted near the end of the session at 3.68% after opening at 3.66%. The two-year note was quoted near the end of the session at 0.45% after opening at 0.43%.
The Treasury Department auctioned $29 billion of seven-year notes, with a 1 7/8% coupon, a 1.890% high yield, a price of 99.90. The bid-to-cover ratio was 3.04. The Federal Reserve banks bought $913.6 million for their own account in exchange for maturing securities.
Elsewhere in the new-issue market Wednesday, the Pennsylvania Housing Finance Agency came to market with $354 million of debt over two issues.
Barclays Capital priced $250 million of single family mortgage revenue for the agency in two series.
Bonds from the $116.5 million series, which are subject to the alternative minimum tax, mature from 2014 through 2020, with a term bond in 2025. Yields range from 2.45% in 2014 to 4.75% in 2025, all priced at par. The bonds are callable at par in 2019.
Bonds from the $133.5 million series, which are not subject to the AMT, mature from 2011 through 2021, with term bonds in 2025, 2030, and 2039. Yields range from 0.45% in 2011 to 4.75% in 2039, all priced at par. The bonds are callable at par in 2019.
Also, Morgan Stanley priced $104 million of single family mortgage revenue bonds for the agency.
The bonds mature from 2011 through 2020, with term bonds in 2025 and 2028. Yields range from 0.45% in 2011 to 3.05% with a 4.5% coupon in 2028. The bonds are callable at par in 2019.
The credit is rated Aa2 by Moody’s and AA-plus by Standard & Poor’s.
Meantime, Citi priced $123.6 million of taxable BABs for the Indiana Municipal Power Agency.
The BABs mature in 2042 and were priced to yield 190 basis points over the comparable Treasury yield. The bonds contain a make-whole call at Treasuries plus 30 basis points.
The credit is rated A1 by Moody’s and A-plus by both Standard & Poor’s and Fitch.
The economic calendar was light Wednesday.