Munis End Unchanged With a Firmer Tone

The municipal market was mostly unchanged yesterday, with a slightly firmer tone, amid fairly light secondary trading ­activity.

“There’s not a whole lot trading at this point,” a trader in New York said. “It’s a pretty quiet start to things this week. I’m not seeing a lot of movement; we’re fairly flat, and just pretty unchanged.”

“There’s a bit of firmness in spots, but not a lot going on,” a trader in Los Angeles said. “We’re maybe a basis point or so better here and there, in fairly light trading.”

The Treasury market was mostly flat, with some mild losses yesterday. The benchmark 10-year note was quoted near the end of the session with a yield of 3.81% after also opening at 3.81%. The yield on the two-year was quoted near the end of the session at 1.07% after also opening at 1.07%. The yield on the 30-year bond was quoted near the end of the session at 4.67% after opening at 4.66%.

The Treasury Department yesterday auctioned $11 billion of five-year inflation-indexed notes with a 0.50% coupon, a 0.550% high yield, and an adjusted price of 99.7. The bid-to-cover ratio was 3.15. The Federal Reserve banks bought nothing for their own account in exchange for maturing securities.

The Municipal Market Data triple-A scale yielded 2.97% in 10 years and 3.82% in 20 years yesterday, compared with Friday’s levels of 2.98% and 3.82%. The scale yielded 4.11% in 30 years yesterday, matching Friday.

Friday’s triple-A muni scale in 10 years was at 78.0% of comparable Treasuries and 30-year munis were at 88.2%, according to MMD, while 30-year tax-exempt triple-A general obligation bonds were at 91.9% of the comparable London Interbank Offered Rate.

Volume will be noticeably lighter and smaller-sized offerings will take the spotlight this week in place of the meatier deals that have dominated primary activity recently.

Underwriters are expected to price an estimated $3.64 billion in new supply, according to Ipreo LLC and The Bond Buyer.

That amount is nearly half of last week’s revised $6.29 billion, according to Thomson Reuters.

The largest deal this week is a $421.7 million competitive GO refunding planned by Wake County, N.C.

The bonds have triple-A ratings from Moody’s Investors Service, Standard & Poor’s, and Fitch Ratings and are structured as serial bonds maturing from 2013 to 2026. They are expected to be sold ­tomorrow.

Meanwhile, a handful of deals — led by a $253 million revenue sale from the Massachusetts Water Resources Authority — are on tap in the Northeast.

The water deal is earmarked for pricing by Citi today and is comprised of $100 million of new-money general revenue bonds and $153 million of refunding bonds. Both series are structured to mature from 2015 to 2030 and term in 2035 and 2040. They are rated Aa2 by Moody’s, AA-plus by Standard & Poor’s, and AA by Fitch.

Meanwhile, issuers in Connecticut, New Jersey, and New York will deliver a trio of higher education offerings, the largest of which is a $189.1 million revenue sale from the Connecticut Health and Educational Facilities Authority on behalf of Wesleyan University.

Rated Aa3 by Moody’s and AA-minus by Standard & Poor’s, the deal is expected to be priced by Goldman, Sachs & Co. with a structure that includes serial bonds maturing from 2023 to 2030 with term bonds planned in 2035 and 2039.

In a weekly report, George Friedlander, muni strategist at Morgan Stanley Smith Barney, wrote that “the substantial ratings shift at Moody’s has to be considered a strong 'vote of confidence’ regarding municipal credit strength.”

Friedlander cited the recalibrations as a reason for the strengthening tax-exempt market last week, but also cited “several additional reasons” for the past week’s muni market strength.

“First, the forward calendar appears to be light. On Friday, April 24, The Bond Buyer’s 30-day visible supply stood at a paltry $5.730 billion — and that includes Build America Bonds,” he wrote. “Initial indications are that for the week ended April 30, issuance will be below $4 billion, although only a small proportion will be BABs.”

“Second, the sense on the Street is that redemptions due to maturities and refundings will be sharply higher in May and June than they were in 2009, before leveling off in July and August,” Friedlander wrote. “Reinvestable cash coming from maturing and called bonds has a different market impact from year to year, depending on market conditions, investor attitudes toward equities, etc. This year, a significant proportion of that returning cash is likely to be available for reinvestment back out along the muni yield curve, given near-zero yields on cash and cash equivalents.”

Trades reported by the Municipal Securities Rulemaking Board yesterday were flat to slightly firmer. Bonds from an interdealer trade of Oregon 5s of 2026 yielded 3.70%, even with where they were sold Friday.

A dealer sold to a customer taxable Connecticut BABs 5.03s of 2024 at 5.01%, one basis point lower than where they were sold Friday.

A dealer sold to a customer Port Authority of New York and New Jersey 4.75s of 2032 at 4.30%, even with where they traded Friday. Bonds from an interdealer trade of taxable Portsmouth, Va., BABs 6.28s of 2040 at 6.07%, even with where they were sold Friday.

Bonds from an interdealer trade of taxable Los Angeles Unified School District 5.98s of 2027 yielded 5.95%, down one basis point from where they were sold Friday. A dealer sold to a customer California 6.5s of 2033 at 4.83%, even with where they traded Friday.

Bonds from an interdealer trade of Puerto Rico 5.5s of 2022 yielded 5.30%, even with where they were sold Friday. Bonds from an interdealer trade of insured Montgomery County, Kan., Unified School District No. 446 6.59s of 2033 yielded 6.16%, one basis point lower than where they traded Friday.

A dealer bought from a customer San Antonio 4.5s of 2023 at 3.80%, even with where they traded Friday. A dealer sold to a customer Scottsdale, Ariz., 4s of 2029 at 4.17%, even with where they were sold Friday.

The economic calendar was light ­yesterday.

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