The municipal market was firmer Thursday amid moderate secondary trading activity as the California Department of Water Resources and New York City led the primary with nearly $3 billion of combined new issuance.
"We're getting a nice bump today," a trader in New York said Thursday. "There was a lot of concern coming into this week about handling all the supply that was on the calendar, but with a couple of refunding deals being pulled from the calendar and Treasuries rallying a bit, the equation changed a bit."
The trader said yields were up two or three basis points.
In the new-issue market, Bank of America Merrill Lynch priced $1.8 billion of power supply revenue bonds Thursday on behalf of the California DWRs.
The bonds mature from 2011 through 2020, with yields ranging from 0.83% with a 2% coupon in 2012 to 2.94% with a 5% coupon in 2020. The bonds are not callable.
The bonds are rated Aa3 by Moody's Investors Service, AA-minus by Standard & Poor's, and AA by Fitch Ratings.
New York City came to market with $925 million of taxable debt over two series, including $775 million of taxable Build America Bonds.
The BABs, which were priced by Bank of America Merrill, mature from 2019 through 2021 and in 2024 and 2025, with term bonds in 2031 and 2037.
Yields range from 3.947% in 2019, or 2.57% after the 35% federal subsidy, to 5.517% in 2037, or 3.59% after the subsidy, all priced at par.
The bonds were priced to yield between 155 and 275 basis points over the comparable Treasury yields, and all except for bonds maturing in 2031 contain a make-whole call at Treasuries plus 40 basis points.
The 2031 debt is callable at par in 2020.
New York City also issued $150 million of taxable general obligation bonds competitively. The offering was sold to Citi.
The bonds mature from 2012 through 2018, yielding 2.84%, 3.14%, and 3.48% in 2016, 2017, and 2018, all priced at par. Bonds maturing from 2012 through 2015 were not formally re-offered.
The bonds were priced to yield between 110 and 140 basis points over the comparable Treasury yields.
The credit is rated Aa2 by Moody's and AA by Standard & Poor's and Fitch.
The Municipal Market Data triple-A scale yielded 2.35% in 10 years Thursday, down eight basis points from Wednesday's 2.43%, while the 20-year scale dropped three points to 3.32% from Wednesday's 3.35%.
The scale for 30-year debt yielded 3.72%, one basis point lower than Wednesday's 3.73%.
"We're definitely a bit better," a trader in Los Angeles said. "A lot of the gains we're seeing are mostly situated on the short end of the curve. We might be up five, six, even eight basis points on the really short end."
The trader said yields were about two basis points better beyond the short end.
"We're seeing some gains today, which I don't think a lot of people would have predicted at the start of the week," he said.
The Treasury market was mixed Thursday. The benchmark 10-year note was quoted near the end of the session at 2.39% after opening at 2.40%.
The 30-year bond was quoted near the end of the session at 3.72% after opening at 3.67%. The two-year note was quoted near the end of the session at 0.36% after opening at 0.38%.
Elsewhere in the new-issue market Thursday, Morgan Stanley priced $200 million of taxable BABs for the Utah Transit Authority.
The BABs mature in 2040, yielding 5.705% priced at par, or 3.71% after the 35% federal subsidy.
The bonds, which contain a make-whole call at Treasuries plus 30 basis points, are rated Aa3 by Moody's, A by Standard & Poor's, and AA-minus by Fitch. They were priced to yield 200 basis points over the comparable Treasury yield.
Bank of America priced $116.6 million of higher education revenue bonds for Texas' Southwest Higher Education Authority.
The bonds mature from 2014 through 2030, with term bonds in 2035 and 2041. Yields range from 1.29% with a 4% coupon in 2014 to 4.28% with a 5% coupon in 2041.
The bonds, which are callable at par in 2020, are rated Aa3 by Moody's and AA-minus by Standard & Poor's.
Trades reported by the Municipal Securities Rulemaking Board showed gains Thursday. Bonds from an interdealer trade of taxable Pennsylvania BABs 4.125s of 2022 yielded 3.01%, three basis points lower than where they were sold Wednesday.
Bonds from an interdealer trade of taxable Connecticut BABs 5.09s of 2030 yielded 4.99%, four basis points lower than where they traded Wednesday.
A dealer bought from a customer Illinois Finance Authority 6s of 2039 at 5.22%, down two basis points from where they were sold Wednesday. Bonds from an interdealer trade of California 5s of 2026 yielded 4.25%, three basis points lower than where they traded Wednesday.
In economic data released Thursday, initial jobless claims fell 11,000 to 445,000 the week ending Oct. 2, the lowest level of initial claims since July.
Continuing claims fell to 4.462 million the week ending Sept. 25 to post a fourth straight decline and dip below the 4.5 million mark for the first time since June.
Economists expected 453,000 initial claims and 4.460 million continuing claims.