Tax-exempts were slightly firmer Tuesday as 20-year municipals dropped to another record low, albeit with the light to moderate secondary trading activity that is characteristic of the summer.
“There’s a bit of a firmer tone,” a trader in New York said. “There isn’t a whole lot of activity though, so I’m not sure you can call it anything other than flat at this point. Maybe we’re better a basis point or so, but there’s just not a lot trading.”
The Municipal Market Data triple-A scale yielded 2.18% in 10 years and an all-time low of 3.28% in 20 years Tuesday, following 2.19% and 3.30% yields on Monday. The scale yielded 3.67% in 30 years Tuesday, following 3.69% Monday, to match the new record set Wednesday.
The 20-year tax-exempts set a new record low for the fifth time in the past eight sessions. The yield on the 10-year muni fell one basis point shy of the record set Wednesday and has established new lows 12 times in the past 17 sessions. Likewise, 30-year tax-exempts have set new record lows four of the past eight sessions.
“There is definitely some firmness out there, but it’s a quiet week,” a trader in Los Angeles said. “We’re going to pick up maybe a basis point, maybe two, but it’s the week before Labor Day. There’s just not a lot trading.”
Tuesday’s triple-A muni scale in 10 years was at 87.9% of comparable Treasuries and 30-year munis were at 104.3%, according to MMD, while 30-year tax-exempt triple-A general obligation bonds were at 116.9% of the comparable London Interbank Offered Rate.
The Treasury market showed gains Tuesday. The benchmark 10-year note was recently at 2.47% after opening at 2.52%.
The 30-year bond was quoted near the end of the session at 3.52% after opening at 3.58%. The two-year note was quoted near the end of the session at 0.48% after opening at 0.50%.
In the new-issue market Tuesday, Bank of America Merrill Lynch priced $600 million of turnpike revenue Build America Bonds for the Pennsylvania Turnpike Commission.
The bonds mature in 2045 and 2049, yielding 5.511%, or 3.58% after the 35% federal subsidy, and 5.561%, or 3.61% after the subsidy, both priced at par. The bonds were priced to yield 195 and 200 basis points over the comparable Treasury yield.
The bonds, which contain a make-whole call at Treasuries plus 30 basis points, are rated Aa3 by Moody’s Investors Service and A-plus by Standard & Poor’s and Fitch Ratings.
Goldman, Sachs & Co. priced $183.2 million of contract tax bonds for Texas’ Harris County Flood District.
The bonds mature from 2024 through 2030, with term bonds in 2034 and 2039. Yields range from 2.96% with a 5% coupon in 2024 to 3.94% with a 5% coupon in 2039.
The bonds, which are callable at par in 2020, are rated AAA by Standard & Poor’s and Fitch.
Morgan Stanley priced $72.9 million of mortgage revenue bonds for the New York State Mortgage Agency in four series.
Bonds from the $14.8 million series mature from 2011 through 2022, with term bonds in 2025 and 2028. Yields range from 0.40% in 2011 to 4.00% in 2028, all priced at par. The bonds are callable at par in 2019.
Bonds from the $5.2 million series mature from 2011 through 2018, with yields ranging from 0.40% in 2011 to 2.50% in 2018, all priced at par. The bonds are not callable. Bonds from the $14.3 million series mature from 2011 through 2017, with yields ranging from 0.40% in 2011 to 2.30% in 2017, all priced at par. The bonds are not callable.
Bonds from the $38.6 million series, which is subject to the alternative minimum tax, mature from 2011 through 2021, with term bonds in 2023 and 2024. Yields range from 1.15% in 2011 to 4.35% in 2024, all priced at par. The bonds are callable at par in 2019.
The credit is rated Aaa by Moody’s.
Topeka, Kan., competitively sold $36.7 million of GO bonds to Piper Jaffray & Co., in two series.
Bonds from the $35.0 million Series B mature from 2011 through 2027, with term bonds in 2030 and 2036. Coupons range from 2% in 2011 to 4.375% in 2036. None of the bonds were formally re-offered. The bonds are callable at par in 2015.
Bonds from the $1.7 million Series A mature from 2011 through 2027, with term bonds in 2030. Coupons range from 2% in 2011 to 4% in 2030. None of the bonds were formally re-offered. The bonds are callable at par in 2015.
The credit is rated Aa2 by Moody’s.
Trades reported by the Municipal Securities Rulemaking Board showed some gains Tuesday. A dealer sold to a customer taxable Forsyth County, N.C., BABs 5.17s of 2030 at 4.75%, down one basis point from where they traded Monday. A dealer bought from a customer Clark County, Nev., 5s of 2022 at 3.16%, down one basis point from where they traded Monday. A dealer sold to a customer Illinois Finance Authority 5.5s of 2037 at 5.75%, one basis point lower than where they traded Monday.
In economic data released Tuesday, the Chicago Purchasing Managers’ Business Barometer fell to 56.7 in August from 62.3 in July. Economists polled by Thomson Reuters predicted a 62.3 reading for the indicator.
The consumer confidence index climbed to 53.5 in August from an upwardly revised 51.0 last month. The July index was originally reported as 50.4. Economists polled by Thomson predicted the index would be 50.4.
“The major regional manufacturing indexes were mixed in August, indicating that tomorrow’s ISM Manufacturing Survey will likely decline slightly but remain in modest expansionary territory,” said Steven Wood, chief economist at Insight Economics.