The municipal market was firmer yesterday, as most of the week's largest scheduled deals were priced in the primary market. Traders said tax-exempt yields were lower by six or seven basis points overall.
"We were kind of getting firmer and firmer as the day wore on, because demand held in there pretty strong," a trader in Los Angeles said. "The new issues were priced pretty strongly, and the secondary was pretty active as well. It's a pretty positive day out there."
In the new-issue market yesterday, Citi priced $1.1 billion of tax-exempt and taxable state personal income tax revenue bonds for New York's Empire State Development Corp. in four series. The deal was originally slated for retail pricing through yesterday and institutional pricing today, but was accelerated to include institutional pricing yesterday to take advantage of market conditions.
Bonds from the tax-exempt $342.3 million Series A-1 mature from 2009 through 2023, with a term bond in 2028. Yields range from 2.00% with a 3% coupon in 2010 to 5.10% with a 5% coupon in 2028. Bonds maturing in 2009 will be decided via sealed bid. The bonds are callable at par in 2028.
Bonds from the tax-exempt $500.7 million Series B-1 mature from 2010 through 2023, with term bonds in 2028, 2036, and 2038. Yields range from 2.09% with a 3% coupon in 2011 to 5.34% with a 5.25% coupon in 2038. Bonds maturing in 2010 were decided via sealed bid. These bonds are callable at par in 2019.
The deal also contained two taxable series. Series A-2, worth $131.2 million, matures in 2009, 2010, 2013, and 2018. Bonds maturing in 2009 were decided via sealed bids. The remaining maturities yield 4.32%, 5.64%, and 6.50%, respectively, all priced at par. Taxable Series B-2, worth $106.8 million, matures in 2010, 2013, and 2018, yielding 3.96%, 5.24%, and 6.45%, respectively, all priced at par.
The credit is rated AAA by Standard & Poor's and AA-minus by Fitch Ratings.
Trades reported by the Municipal Securities Rulemaking Board yesterday showed gains. Bonds from an interdealer Port Authority of New York and New Jersey yielded 5s of 2038 yielded 5.35%, down six basis points from where they traded Tuesday. A dealer sold to a customer Bay Area Toll Authority 5s of 2039 at 5.53%, five basis points lower than where they traded Tuesday. Bonds from an interdealer trade of New York 5s of 2026 yielded 5.28%, eight basis points lower than where they were sold Tuesday.
"We're up a couple basis points at least right now," a trader in New York said. "We'll see if we can hold this firmness the rest of the week with all the new issuance that's on the calendar, but right now people are buying bonds, there's some decent demand out there, and we're definitely better."
In other new-issue activity, Washington competitively sold $400 million of general obligation bonds to JPMorgan in two series.
JPMorgan won a $270 million series of various-purpose GOs with a true interest cost of 4.56%. The bonds mature from 2010 through 2034. Yields range from 3.26% with a 4% coupon in 2018 to 4.63% with a 5% coupon in 2026. Bonds maturing from 2010 through 2017 and from 2027 through 2024 were not formally re-offered.
JPMorgan also won a $130 million series of motor-vehicle fuel tax GOs with a TIC of 4.56%. The bonds mature from 2010 through 2034. Yields range from 1.80% with a 4% coupon in 2011 to 4.19% with a 5% coupon in 3033. Bonds maturing in 2010, from 2012 through 2017, and from 2023 through 2034 were not formally re-offered.
Washington Treasurer Michael J. Murphy said in a written statement that the state is "very pleased with the results."
"The fact we received five bids in both sales shows that Washington maintains a very good credit rating and the market still has a strong interest in quality municipal bonds," Murphy said.
All bonds are callable at par in 2019. The credit is rated Aa1 by Moody's Investors Service, AA-plus by Standard & Poor's, and AA by Fitch.
JPMorgan priced $348.7 million of power supply revenue bonds for the California Department of Water Resources in two series. The deal follows Tuesday's retail order period. Bonds from the $150 million Series F-3 contain split maturities in both 2020 and 2021. Bonds maturing in 2020 yield 4.47%, with coupons of 4.375% and 5%. Bonds maturing in 2021 yield 4.72%, with coupons of 4.625% and 5%. Bonds from the $200 million Series F-5 contain split maturities in 2022, which yield 4.88% with coupons of 4.75% and 5%. All yields were lowered by two basis points at re-pricing. All bonds are callable at par in 2018. The credit is rated Aa3 by Moody's and A-plus by Standard & Poor's and Fitch.
Merrill Lynch & Co. priced $175 million of water and wastewater system revenue refunding bonds for Austin. The bonds mature from 2011 through 2029, with yields ranging from 1.98% in 2011 to 5.19% in 2029, all priced at par. The bonds, which are callable at par in 2019, are rated Aa3 by Moody's, AA by Standard & Poor's, and AA-minus by Fitch.
The Treasury market, however, showed some losses yesterday. The yield on the benchmark 10-year Treasury note, which opened at 2.44%, was quoted near the end of the session at 2.48%. The yield on the two-year note was quoted near the end of the session at 0.80% after opening at 0.76%. The yield on the 30-year bond, which opened at 2.99%, was quoted near the end of the session at 3.04%.
The Treasury Department yesterday auctioned $30 billion of three-year notes with a 1 1/8% coupon at a 1.200% yield, a price of about 99.78. The bid-to-cover ratio was 2.21. Federal Reserve banks also bought about $2.5 billion for their own account in exchange for maturing securities.
The economic calendar was light yesterday.
