The municipal market was firmer Wednesday amid light to moderate secondary trading activity.
“We’re seeing some gains,” a trader in New York said. “We’re better maybe three or four basis points right now.”
The Municipal Market Data triple-A 10-year scale fell four basis points Wednesday to 3.24%, the 20-year dropped five basis points to 4.47%, and the scale for 30-year bonds declined four basis points to 4.82%.
In the daily MMD commentary, Randy Smolik wrote that “dealers noted how light this coming week’s primary calendar will be, causing bidders to step up on customer sell lists.”
“Intermediates saw the strongest support,” he wrote. “New-money bonds issued in 2009 and 2010 still carried a special mystique. The light primary supply forced most customers to hold positions even though ratios to taxables continued to drop. The sellers that had surfaced today saw impressive bids, underscoring gains in the intermediate and dollar-bond sectors similar to the four to five basis point bumps in the MMD triple-A curve yesterday, less for maturities 2018 and shorter.”
Wednesday’s triple-A muni scale in 10 years was at 89.5% of comparable Treasuries and 30-year munis were at 103.2% according to MMD. Meanwhile, 30-year tax-exempt triple-A general obligation bonds were at 108.8% of the comparable London Interbank Offered Rate.
Treasuries showed losses Wednesday. The benchmark 10-year note was quoted near the end of the session at 3.62% after opening at 3.61%. The 30-year bond finished at 4.68% after opening at 4.66%. The two-year note was quoted near the end of the session at 0.84% after also opening at 0.82%.
In the new-issue market Wednesday, Citi priced $175 million of revenue bonds for the Washington Health Care Facilities Authority on behalf of Swedish Health Services.
The bonds mature from 2012 through 2021, with term bonds in 2025, 2027, 2031, and 2041. Yields range from 2.00% with a 3% coupon in 2012 to 6.39% with a 6.75% coupon in 2041.
The bonds are callable at par in 2021, except bonds maturing in 2027, which are callable at par in 2015.
The credit is rated A2 by Moody’s Investors Service and A-plus by Fitch Ratings.
Bank of America Merrill Lynch priced for retail investors $150 million of health system revenue bonds for the Pennsylvania Higher Educational Facilities Authority.
The bonds mature from 2022 through 2026, with split term maturities in 2041. Yields range from 5.00% with a 4.75% coupon in 2022 to 5.95% with a 5.875% coupon in 2041. The other 2041 maturity was not offered to retail investors.
The bonds, which are callable at par in 2021, are rated Aa3 by Moody’s and AA-minus by Standard & Poor’s.
In economic data released Wednesday, new housing starts jumped 14.6% to a seasonally adjusted 596,000 in January, the highest level in five months, as building permits dropped following a spike in December permits as a result of code changes in four states.
Building permits fell 10.4% to a seasonally adjusted 562,000. Permits surged to 627,000 in December, revised lower from 635,000 permits reported last month. Three states — New York, Pennsylvania and California — changed building code laws effective Jan. 1, causing builders to rush into permits in December.
Economists expected 540,000 housing starts and 570,000 building permits, according to the median estimate from Thomson Reuters. December housing starts were revised lower to 520,000 from 529,000.
Producer prices rose 0.8% in January, led by a 1.8% increase in prices for finished energy goods, while core prices that exclude food and energy goods rose 0.5%, the third consecutive gain. Economists were on target, expecting producer prices to rise 0.8%, but fell far short on the gain in core prices, projecting an increase of only 0.2%, according to the median estimate from Thomson Reuters.
Industrial production slipped 0.1% in January as utilities’ output declined with the return of more seasonable weather. December industrial production was revised higher to a 1.2% increase from a 0.8% gain reported last month. Capacity utilization dipped to 76.1% from an upwardly revised 76.2% in December, originally reported as 76.0%.
Economists polled by Thomson Reuters expected a 0.5% increase in industrial production and a 76.4% capacity utilization level, according to the median estimate.
Also, Federal Reserve officials at the most recent meeting of the Federal Open Market Committee “expressed greater confidence” of a sustained economic recovery, strengthening gradually in the “coming quarters” based on economic indicators and business contacts, according to the minutes of the latest FOMC meeting, released Wednesday.