The municipal market was weaker yesterday, following but lagging Treasuries amid fairly light secondary-trading activity.
“We’re a bit weaker,” a trader in New York said. “There’s not a lot trading to really back that up, but it certainly feels weaker.”
“The market is off a bit — probably off anywhere from three to four basis points throughout the curve,” a trader in Chicago said. “We did this because it is Treasuries’ down day. We are going down less quickly because we went up less quickly.”
The Treasury market weakened yesterday, following stock market gains. The benchmark 10-year note finished at 3.34% after opening at 3.19%.
The 30-year bond finished at 4.24% after opening at 4.10%. The two-year note finished at 0.87% after opening at 0.82%.
“The weekend is starting to settle in. [Trading is at] a slower pace with the stock market running,” the Chicago trader added.
“I think retail is watching stocks more than bonds. And they have been the driver of our markets. So when they are not as active, we slow down a bit. We are going to drift into the weekend, as opposed to run into the weekend, because of the stock market.”
The Municipal Market Data triple-A scale yielded 2.80% in 10 years and 3.66% in 20 years yesterday, following levels of 2.76% and 3.62% on Wednesday. The scale yielded 4.00% in 30 years yesterday, up from Wednesday’s 3.96%.
Wednesday’s triple-A muni scale in 10 years was at 86.0% of comparable Treasuries and 30-year munis were at 96.4%, according to MMD, while 30-year tax-exempt triple-A general obligation bonds were at 100.8% of the comparable London Interbank Offered Rate.
In the new-issue market yesterday, Bank of America Merrill Lynch priced $285 million of bonds for the Dormitory Authority of the State of New York, on behalf of Cornell University.
The bonds have a split maturity in 2032 and also mature in 2035 and 2040, with 4% and 5% coupons. Pricing information was not available by press time.
The credit is rated Aa1 by Moody’s Investors Service and AA by Standard & Poor’s.
JPMorgan priced $145 million of taxable GO Build America Bonds for North Las Vegas.
The bonds mature in 2015, from 2017 through 2025, and in 2040.
Yields range from 4.137% in 2015, or 2.69% after the 35% federal subsidy, to 6.572% in 2040, or 4.27% after the subsidy, all priced at par.
The bonds were priced to yield between 195 and 280 basis points over the comparable Treasury yields, and contain a make-whole call at Treasuries plus 35 basis points.
The credit is rated Aa2 by Moody’s, A-plus by Standard & Poor’s, and AA-minus by Fitch Ratings.
Jefferies & Co. priced $142.4 million of state revolving fund revenue bonds for the New York State Environmental Facilities Corp.
The bonds mature from 2010 through 2030, with term bonds in 2035 and 2039. Yields range from 0.35% with a 4% coupon in a split maturity in 2011 to 4.13% with a 5% coupon in 2039.
Bonds maturing in 2010 and some bonds maturing in 2011 were not formally re-offered.
The bonds, which are not callable, are rated triple-A by all three major rating agencies.
RBC Capital Markets priced $50 million of revolving loan program bonds for the University System of Maryland.
The bonds mature in 2023, yielding 1.50% priced at par, and are not callable.
The credit is rated Aa1 by Moody’s and AA-plus by Standard & Poor’s.
RBC also priced $45.2 million of debt for Tempe, Ariz., including $28.4 million of taxable GO BABs.
The BABs mature from 2020 through 2025, with a term bond in 2030. Yields range from 4.217% in 2020, or 2.74% after the 35% federal subsidy, to 5.719% in 2030, or 3.72% after the subsidy, all priced at par.
The bonds were priced to yield between 100 and 175 basis points over the comparable Treasury yield, and are callable at par in 2020.
The deal also contained $16.8 million of tax-exempt GOs, which mature from 2011 through 2019, with yields ranging from 0.53% with a 3% coupon in 2011 to 2.91% with a 4% coupon in 2019.
The tax-exempt bonds are not callable.
The credit is rated triple-A by all three major rating agencies.
In economic data released yesterday, initial jobless claims fell to 460,000 for the week ending May 22, just above economists’ estimates and the second highest level in over a month.
Meanwhile, continuing claims fell to 4.607 million for the week ending May 15, down 49,000 from 4.656 million the previous week and the lowest level since March 27.
Economists expected 455,000 initial claims and 4.62 million continuing claims, according to the median estimate from Thomson Reuters.
Gross domestic product for the first quarter was unexpectedly revised lower to a 3.0% annualized growth rate.
The core personal consumption expenditures figure was unchanged from the advance reading of a 0.6% rise, and is the smallest increase on record dating back to 1959.
Economists expected GDP to be revised to 3.4% for the first quarter and for core PCE to remain at 0.6%, according to the median estimate from Thomson Reuters.
Priti Patnaik contributed to this column.