The municipal market was slightly firmer yesterday. Traders said tax-exempt yields were lower by about three or four basis points.
"For the first time in a while, munis are feeling a little bit better at this point," a trader in New York said. "Even before the housing number came out, munis were doing better by two to three basis points. There appears to be retail demand on the long end right now. On the shorter end, you have people looking for good, clean, high-grade paper."
The Treasury market showed some gains yesterday. The yield on the benchmark 10-year Treasury note, which opened at 4.13%, finished at 4.12%. The yield on the two-year note was quoted near the end of the session at 2.74% after opening at 2.77%.
"We sort of just followed Treasuries," a trader in Los Angeles said. "It was a welcome positive day, after a number of negative ones in a row."
In economic data released yesterday, initial jobless claims for the week ended July 19 came in at 406,000 after a revised 372,000 the week beffore. Economists polled by IFR Markets had predicted 375,000 initial jobless claims.
Existing home sales decreased 2.6% in June to a seasonally adjusted 4.86 million-unit rate. The sales decrease to 4.86 million compared to the 4.940 million unit pace predicted by IFR's poll of economists and followed an unrevised 2.0% rise to a 4.99 million unit level in May.
The economic calendar for today includes durable goods orders for June, new home sales for June, and the final July University of Michigan consumer sentiment index.
Economists polled by IFR Markets are predicting a 0.4% decline in durable goods, a 0.2% dip in durable goods excluding transportation, 505,000 new home sales, and a 56.4 reading of the University of Michigan sentiment index.
In the new-issue market yesterday, Lehman Brothers priced $320.5 million of revenue bonds for the Massachusetts Health and Educational Facilities Authority. The bonds have two maturities in 2014, and also mature in 2019 and 2038, yielding 3.28% with a 5% coupon, 3.28% with a 3.5% coupon, 4.00% with a 5% coupon, and 4.83% with a 5% coupon, respectively. The bonds, which are callable at par in 2017, are rated triple-A by both Moody's Investors Service and Standard & Poor's.
Merrill Lynch & Co. priced $234 million of taxable and tax-exempt bonds for the Pennsylvania Turnpike Commission in two series. Bonds from the $165 million tax-exempt series mature from 2025 through 2030, with term bonds in 2033 and 2036. Yields range from 5.02% with a 4.75% coupon in 2025 to 5.38% with a 5.25% coupon in 2036. The bonds, which are callable at par in 2018, are rated A2 by Moody's and A-minus by Standard & Poor's. The deal also contains a $69 million taxable component.
Morgan Stanley priced $68 million of facilities revenue refunding bonds for the Indiana Finance Authority in two series. Bonds from the larger $52.5 million Series C mature from 2010 through 2020, with yields ranging from 2.62% with a 4% coupon in 2010 to 4.63% with a 5.25% coupon in 2020. Bonds from the $15.5 million Series D mature from 2009 through 2020, with yields ranging from 1.87% with a 4% coupon in 2009 to 4.63% with a 5.25% coupon in 2020. None of the bonds are callable. The credit is rated Aa2 by Moody's, AA-plus by Standard & Poor's, and AA by Fitch Ratings.
RBC Capital Markets priced $54.8 million of unlimited-tax school building bonds for the Livingston Independent School District in Polk County, Tex. The bonds mature in 2009, and from 2014 through 2028, with term bonds in 2033 and 2038. Yields range from 1.70% with a 3.5% coupon in 2009 to 5.10% with a 5% coupon in 2038. The bonds, which are callable at par in 2018, are backed by the Permanent School Fund guarantee program. The underlying credit is rated A by Standard & Poor's. The deal also contains about $2.2 million of capital appreciation bonds, which mature from 2010 through 2013.
Meriden, Conn., competitively sold $33.1 million of general obligation bonds to Hutchinson, Shockey, Erley & Co. with a TIC of 4.48%. The bonds mature from 2009 through 2028, with yields ranging from 1.70% with a 4% coupon in 2009 to 4.90% with a 4.75% coupon in 2028. The bonds, which are callable at par in 2016, are insured by Assured Guaranty Corp.
Also, details were released on Citi's pricing of $625 million of revenue bonds for the Florida Hurricane Catastrophe Fund Finance Corp. The bonds carry four maturities, two in 2013 and two in 2014. They yield 4.50% with a 4.125% coupon and 4.50% with a 5% coupon in 2013, and 4.625% with a 4.25% coupon and 4.625% with a 5% coupon in 2014. The bonds are not callable. The credit is rated Aa3 by Moody's, and AA-minus by both Standard & Poor's and Fitch.
Ben Watkins, director of the Florida Division of Bond Finance and a member of the Cat Fund's board, said the pricing went well and closing is scheduled next week.
"There was an amazing amount" of retail interest, he said. "I was happy to get it done."
As much as $128 million of the transaction sold to retail investors during the two-day retail order period that began Tuesday and stretched into Wednesday morning, Watkins said.