The municipal market closed a day of moderate activity with a stronger tone Thursday.
Several large new deals did well on the day. But the secondary stymied traders with appetite as a healthy amount of bid-wanteds met a distinct scarcity of product.
“The new-issue calendar has been very, very sparse,” a trader in New Jersey said. “There aren’t a lot of bonds around in the secondary, but there’s a good bid there. People want to buy bonds, but they can’t find the products.”
Tax-exempt yields firmed for maturities between 10 and 20 years, as well as those maturities at the back end of the curve, according to the Municipal Market Data scale.
Maturities from 2021 to 2031 and from 2035 to 2041 were one to three basis points lower on the day. Maturities at the front of the curve, as well as those between 2032 and 2034, were steady.
The benchmark 10-year yield Thursday reached a record low, again, as measured by MMD.
It ticked down one basis point on the day to 2.08%. It has fallen 16 points since Sept. 1.
The 30-year yield also inched down a basis point to 3.67%, its lowest level since Aug. 31, 2010.
The two-year yield held fast at 0.30% for a 21st consecutive session, hovering at its lowest level in more than 40 years.
“We just bought 2025 paper; 2025 through 2027 looks attractive,” a trader in New York said early Thursday afternoon. “I’m seeing a lot of offers around that area that are attractive. I’m seeing kickers in that neighborhood, with that short ’13 or ’12 call, which are fantastic. My guys are jumping all over them. That range is doing well.”
Treasury yields, which weakened Wednesday, were back to rally mode Thursday. The 10-year benchmark yield dropped seven basis points to 1.98%, matching its low for the week, and levels it hasn’t seen in more than 50 years.
The 30-year yield shaved six basis points to 3.31%. The two-year yield ticked down one basis point to 0.20%.
Though holiday-shortened, the week was expected to see a larger amount of new issuance than it did last week. Industry estimates place the total for the week at almost $3 billion, versus a rather slight $1.72 billion last week.
The competitive market has been notably lacking in large-scale deals; only a few in excess of $50 million were slated to come to market this week.
In the primary Thursday, Goldman, Sachs & Co. priced $512.1 million of Harris County, Texas, Metropolitan Transit Authority sales and use tax bonds in two series.
The bonds are rated Aa2 by Moody’s Investors Service and AA by Standard & Poor’s.
Yields for the first series, $463 million of sales and use tax bonds, ranged from 0.78% with a 5.00% coupon in 2015 to 4.18% with a 5.00% coupon in 2041.
Yields for the second series, $49.1 million of sales and use tax contractual obligations, ranged from 0.45% with a 4.00% coupon in 2013 to 3.00% with a 5.00% coupon in 2023.
Debt maturing in 2012 was offered in a sealed bid.
At repricing, yields in the first series fell 10 basis points on the short end, eight basis points at the 10–year mark, and five basis points on the long end. Yields in the second series fell between five and six basis points across the front and middle of the curve at repricing.
In addition, Morgan Stanley priced $151.2 million of State of New York Mortgage Agency homeowner mortgage revenue bonds in two series.
The bonds are rated Aa1 by Moody’s.
Yields for the first series, at $66.8 million, range from both 1.85% and 1.90% priced at par in a split maturity in 2016 to 4.60% priced at par in 2036. Credits maturing in different maturities of multiple split maturities in 2020 and 2021 were not formally reoffered.
Yields for the second series, at $84.4 million, range from both 0.60% and 0.70% priced at par in a split maturity in 2013 to 3.40% priced at par in 2022. Debt maturing in different maturities of multiple split maturities from 2015 to 2017 were not formally reoffered.
Also on Thursday, Siebert Brandford Shank & Co. repriced $351.9 million of New York State Thruway Authority state personal income tax revenue bonds. The bonds, priced for retail Wednesday, were rated AAA by Standard & Poor’s and AA by Fitch Ratings.
Yields at repricing range from 0.47% with coupons of 3.00% and 4.00% in a split maturity in 2014 to 3.28% with a 5.00% coupon in 2026. Debt maturing in 2012 and 2013 were not formally reoffered.
Yields on the short and long ends were selectively lowered at repricing by one or two basis points.
Some intermediate yields, however, were raised one or two basis points at repricing.
The New York Mortgage Agency and Thruway Authority deals did very well on the day, a trader in the state said. “That certainly helps the market,” he said.
“I thought the thruway deal could be priced a little better,” he added, “but I sent it to my guys thinking they weren’t going to do too much. And they did pretty well with it. When they’re starved for paper they’ll do anything.”
Yields on the thruway deal weren’t too aggressive, he said. But the coupons could have been improved, he added.
“I don’t know who their audience was,” the trader said. “But if it was for retail, they totally missed the ball on that, because the dollar prices were a little higher. Nothing was close to par, and that’s really what the retail buyer wants.”