Municipals were firmer yesterday, following Treasuries, while in the new-issue market, the District of Columbia sold $327 million of general obligation bonds, most of which were insured by Berkshire Hathaway Assurance Corp.
In the secondary, traders said the market was up as much as three to five basis points.
"With Treasuries coming back from [Monday's] fade, munis have really caught some traction," a trader in Chicago said. "Spreads have come in a little bit."
Trades reported to the Municipal Securities Rulemaking Board were firmer. A dealer sold to a customer insured Memphis 5s of 2025 yielding 4.535%, down three basis points from where they traded yesterday. Bonds from an interdealer trade of New York City 4.875s of 2029 yielded 4.96%, down four basis points from where they traded yesterday. Bonds from an interdealer trade of California 5.125s of 2036 yielded 5.20%, down 5.24% from yesterday.
"The market definitely has a firmer tone to it, especially paper with good underlying names and ratings," a trader in New Jersey said. "We're working through some of last week's issues, but it's still pretty quiet. We usually call it quiet Summer Mondays, but it seems like it's been like that Tuesdays, Wednesdays, Thursdays, and Fridays this summer, too."
The Treasury market showed some gains yesterday. The yield on the benchmark 10-year Treasury note, which opened at 4.00%, closed at 3.90%. The yield on the two-year note closed at 2.44% after opening at 2.54%. The yield on the 30-year Treasury closed at 4.54% after opening at 4.61%.
In yesterday's new issues, Merrill Lynch & Co. priced a $326.99 million GO deal for the District of Columbia. The bonds mature 2009 through 2028 with a term bond in 2033. Yields range from 2.00% with a 4.00% coupon in 2009 to 5.02% with a 5.00% coupon in 2033. Bonds maturing 2013 through 2033 are insured by BHAC. The bonds, which are callable at par in 2018, have underlying ratings of A1 from Moody's Investors Service, and A-plus from Standard & Poor's and Fitch Ratings.
The bonds mark one of BHAC's few deals in the primary market. The new insurer - which first wrote business in the first quarter - has focused mostly on backing secondary market bonds. For the first half of the year, it had wrapped just two new issues with a par value of $361.2 million, according to Thomson Reuters data.
"The district could have done this deal uninsured, but because we got good pricing from Berkshire, we were able to get a better deal for the district by using their insurance," said treasurer Lasana Mack. Berkshire will also provide insurance on the district's $151.4 million refunding pricing today.
Also, Merrill Lynch priced $250 million of home mortgage revenue bonds for the California Housing Finance Agency, some of which are subject to the alternative minimum tax. Bonds from the AMT-exempt, $189.8 million Series L mature 2009 through 2018, with terms bonds in 2028, 2033, and 2038. All bonds priced at par, with coupons ranging from 1.75% in 2009 to 5.50% in 2038. Bonds from the $60.2 million Series M mature 2023 and 2025, subject to the AMT. Bonds from both series are callable at par and rated Aa2 by Moody's and AA-minus by Standard & Poor's.
Milwaukee competitively sold $210 million of school revenue anticipation notes to Citi and Morgan Stanley. Citi purchased $185 million in notes at a true interest cost of 1.6061%, while Morgan Stanley purchased $25 million at a true interest cost of 1.5911%. The notes mature September 2009 and have underlying ratings of MIG1 from Moody's, SP-1-plus from Standard & Poor's and F1-plus from Fitch.
In addition, JPMorgan priced $173.1 million in hospital revenue bonds for the Tarrant County, Tex., Cultural Education Facilities Corp.for the benefit of Scott and White Memorial Hospital and the Scott, Sherwood and Brindley Foundation Project. The bonds mature 2009 through 2019, with term bonds in 2023, 2028, and 2031. Yields range from 2.33% with a 4% coupon in 2009 to 5.61% with a 5.50% coupon in 2031. The bonds, which are callable at par in 2018, are rated Aa3 by Moody's and AA-minus by Standard & Poor's.
JPMorgan priced for retail $58.1 million of mortgage revenue bonds for Oregon's Housing and Community Services Department, some of which are subject to the alternative minimum tax. Bonds from the AMT-exempt $52.5 million Series 2008 G mature from 2013 through 2023, with term bonds in 2028 and 2030. The bonds were all priced at par with coupons ranging from 3.55% in 2013 to 5.20% in 2028. Bonds maturing 2030 were not offered for retail. The bonds are callable at par in 2018.
Bonds from the $5.5 million Series 2008 H mature from 2009 through 2012 and are subject to the AMT, with coupons ranging from 3% in 2009 to 4.15% in 2012. Bonds from both series are rated Aa2 by Moody's.
In yesterday's economic news, the U.S. trade deficit narrowed to $56.8 billion in June from a revised $59.2 billion, with exports rising thanks to a weakened dollar. Economists polled by IFR Markets had expected it to widen to $61.5 billion.
Today begins the release of a slate of data, with July import prices, July retail sales, and June business inventories. Thursday, the July consumer price index, initial jobless claims for the week ended Aug. 9, and continuing jobless claims for the week ended Aug. 2 will be released, followed Friday by July industrial production, July capacity utilization, and the preliminary August University of Michigan consumer sentiment index.
Lynne Funk contributed to this column.