The week’s largest scheduled transaction was priced in the new-issue market yesterday, as tax-exempt yields held mostly unchanged amid light trading in the secondary.
Citi tentatively priced $750 million of revenue bonds for the California Statewide Communities Development Authority on behalf of Oakland-based health care group Kaiser Permanente. Final pricing information was not available by press time.
The bonds contain a three-part 2013 maturity worth $10 million, $10 million, and $280 million; a $100 million maturity in 2014; a 2016 split maturity worth $10 million and $190 million; and a 2019 split maturity worth $10 million and $140 million. The 2013 bonds all yield 3.35%, with 3.25%, 4%, and 5% coupons, respectively. Bonds maturing in 2014 yield 3.70% with a 5% coupon. The 2016 bonds both yield 4.10%, with 4% and 5% coupons, respectively. The 2019 bonds both yield 4.68%, with 4.625% and 5% coupons, respectively. The bonds are not callable and are rated A-plus by Standard & Poor’s and Fitch Ratings.
JPMorgan also priced $50 million of revenue bonds for Kaiser Permanente through the CDA. These bonds mature in 2044, yielding 2.50% with a 4% coupon.
The bonds are not callable, but feature a mandatory put in 2011. The short-term credit is rated F1 by Fitch.
Muni traders said yields on tax-exempt bonds were mostly unchanged in the secondary market yesterday.
“There’s not a whole lot going on right now,” a trader in New York said. “We’re pretty quiet, and pretty flat. I think it’s just unchanged right now.”
However, some traders saw more activity than others.
“The market had a pretty good feel to me,” a trader in Los Angeles said. “It felt like people were intent on buying bonds.”
The government market, however, showed losses yesterday as stocks rose and the New York Federal Reserve purchased $7.4 billion of Treasuries, less than had been anticipated.
The yield on the benchmark 10-year note, which opened at 3.20%, finished at 3.36%. The yield on the two-year note was quoted near the end of the session at 0.87% after opening at 0.84%. The yield on the 30-year bond, which opened at 4.14%, was quoted near the end of the session at 4.31%.
Tony Crescenzi, chairman of Miller Tabak Asset Management, wrote yesterday in an e-mail that Treasuries “took a hit late this morning after the New York Fed said that it had purchased $7.4 billion of the $45.7 billion of Treasuries dealers had offered today as part of a series of planned auctions that are part of the Fed’s program to purchase $300 billion of Treasuries in the six months ending in September.”
“There are two messages here,” he continuedd. “Number one, dealers, by showing a larger-than-normal amount of supply, are indicating that they are 'better sellers’ at current prices,” he wrote. And secondly, “the Fed, in purchasing a smaller proportion than normal of what was offered by dealers, may have wanted to push back the dealer community after many concluded [Wednesday] from the FOMC minutes that the Fed might either increase its Treasury purchases or be more aggressive with its purchases.”
As of Wednesday’s close, the triple-A muni scale in 10 years was at 87.1% of comparable Treasuries, according to Municipal Market Data. Additionally, 30-year munis were 104.8% of comparable Treasuries.
As of the close Wednesday, 30-year tax-exempt triple-A rated general obligation bonds were at 115.7% of the comparable London Interbank Offered Rate.
Elsewhere in the new-issue market yesterday, RBC Capital Markets priced $35 million of certificates of participation for Pima County, Ariz.
The bonds mature from 2010 through 2012, yielding 1.35%, 2.20%, and 2.55%, with 3%, 4%, and 4% coupons, respectively. The bonds, which are not callable, are rated A1 by Moody’s Investors Service and A-plus by Standard & Poor’s.
Burlington County, N.J., competitively sold $27.9 million of bond anticipation notes to Wachovia Bank NA, with a net interest cost of 0.48%. The Bans mature in 2010, with a 1.5% coupon. The notes were not formally re-offered.
Berkeley County, S.C., competitively sold $27.4 million of GO Bans to JPMorgan with a NIC of 0.48%. The Bans mature in 2010, with a 1.25% coupon. The notes were not formally re-offered. The credit is rated MIG-1 by Moody’s and SP-1-plus by Standard & Poor’s.
Trades reported by the Municipal Securities Rulemaking Board yesterday showed little movement. A dealer sold to a customer insured Puerto Rico Public Finance Corp. 5.125s of 2024 at 4.00%, even with where they traded Wednesday.
A dealer sold to a customer insured California 5s of 2037 at 5.54%, one basis point lower than where they traded Wednesday. A dealer bought from a customer Massachusetts Health and Education Facilities Authority 5.25s of 2038 at 6.43%, even with where they were sold Wednesday.
In economic data released yesterday, initial jobless claims came in at 631,000 the week ended May 16, after a revised 643,000 the previous week. Economists polled by Thomson Reuters had predicted 630,000 initial jobless claims.