The municipal market was slightly firmer Tuesday amid light to moderate secondary trading activity, as Minnesota competitively sold $865 million of debt.
“We picked up a couple basis points outside of five or so years,” a trader in Los Angeles said. “We might be flat on the really short end of the curve, but for the most part, you’re talking a bump of one, two, maybe three basis points. It feels firmer.”
Leading the new-issue market Tuesday, Minnesota competitively offered its general obligation bond issue broken into three pieces.
A $635 million tax-exempt component was sold to RBC Capital Markets. Bonds mature from 2011 through 2028, with yields ranging from 0.23% with a 3% coupon in 2011 to 4.00% priced at par in 2030.
Bonds maturing in 2012, 2016, and from 2026 through 2028 were not formally re-offered. The bonds are callable at par in 2020.
The bonds will raise proceeds to finance programs and projects for a variety of purposes, including educational facilities, parks, and pollution-control facilities.
A second tax-exempt piece, with $225 million in par value, was sold to Piper Jaffray & Co.
Bonds mature from 2011 through 2020, with yields ranging from 2.43% with a 5% coupon in 2019 to 3.84% with a 4% coupon in 2029.
Bonds maturing from 2011 through 2018, and in 2020, 2024, 2025, and 2030 were not formally re-offered. The bonds are callable at par in 2020.
The bonds will raise money for improvements and projects on the state’s trunk highway system.
A $5 million taxable portion of the deal, sold to Morgan Keegan & Co., will be used to finance programs for the state’s Rural Finance Authority. The bonds mature in 2015, yielding 1.80% with a 3% coupon.
Minnesota is rated Aa1 by Moody’s Investors Service and AAA by Fitch Ratings.
Meanwhile, Siebert Brandford Shank & Co. priced $706.6 million of state aid revenue notes for the Michigan Finance Authority in three series. Notes from the $255.9 million Series D-1 mature in 2011 yielding 0.80% with a 2% coupon; notes from the $247.9 million Series D-2 mature in 2011 yielding 0.40% with a 2% coupon; and notes from the $202.8 million Series D-3 mature in 2011 yielding 0.40% with a 2% coupon.
The credit is rated SP-1-plus by Standard & Poor’s.
The Treasury market mostly showed some gains Tuesday. The benchmark 10-year note finished at 2.91% after opening at 2.96%. The 30-year bond finished at 4.04% after opening at 4.06%. The two-year note finished at 0.55% after opening at 0.55%.
The Municipal Market Data triple-A scale yielded 2.57% in 10 years and 3.65% in 20 years Tuesday, following levels of 2.58% and 3.67% Monday. The scale yielded 3.96% in 30 years, matching Monday.
“It’s a bit of a quiet start, but there is some firmness out there,” a trader in New York said. “We’re probably up a basis point or two in spots.”
Monday’s triple-A muni scale in 10 years was at 87.2% of comparable Treasuries and 30-year munis were at 97.8%, according to MMD, while 30-year tax-exempt triple-A GOs were at 99.8% of the comparable London Interbank Offered Rate.
Elsewhere in the new-issue market, Bank of America Merrill Lynch priced $150.4 million of lottery revenue bonds Tuesday for the West Virginia Economic Development Authority.
The bonds mature from 2011 through 2030, with term bonds in 2035 and 2040. Yields range from 0.55% with a 2% coupon in 2011 to 4.67% with a 5% coupon in 2040.
The bonds, which are callable at par in 2040, are rated A1 by Moody’s, AAA by Standard & Poor’s, and A-plus by Fitch.
In economic data released Tuesday, personal income and consumption were both flat in June on a seasonally adjusted annual rate.
Core PCE, which excludes food and energy costs, was also flat in June, but increased 1.4% from a year ago. The flat reading in monthly core PCE was the first since a string of three months of unchanged core PCE readings from October to December 2008.
Economists expected personal income to increase 0.2% and for consumption to increase 0.1%, according to the median estimate from Thomson Reuters.
Pending home sales fell 2.6% to a reading of 75.7 in June, a record low, from a revised 29.9% decrease to 77.7 in May, originally reported as a 30.0% decrease to 77.6.
Thomson’s poll of economists had predicted a 79.0 reading.
U.S. factory orders fell 1.2% in June, the second straight monthly decline, and more than double the drop economists expected, the Commerce Department reported Tuesday.
Orders excluding transportation fell 1.1%, the third consecutive decline.
Economists expected factory orders would fall 0.5% for the month, according to the median estimate from Thomson Reuters.
