The municipal market was mostly unchanged with a slightly weaker tone yesterday amid fairly light secondary trading activity, as the Dormitory Authority of the State of New York competitively sold $800 million of taxable Build America Bonds.
“The market is stable. There have been some trades that are slightly weaker with the Treasury sell-off, but I would say only slightly, maybe a couple of basis points or so,” a trader in Los Angeles said. “Really, I think people are watching a few different deals in the market today. And what the institutional customers are doing is looking at the deals and using the cash they have on hand for buying the new issues.”
“It is so all over the market in different names and credits that it is not possible to quantify,” the trader said. “I would say general market revenue bonds are doing extremely well. Institutional selling bonds have a little bit weaker tone on those credits.”
“It’s unchanged and quiet,” a New York trader said. “I am not sure if it is the supply in the market or because it is a holiday week. It is likely to be slower tomorrow. I don’t see any change right now.”
A second trader in New York doesn’t think “anything happening in Europe is having an immediate effect” on municipals.
“It’s too hard to predict what’s going on in Europe, whether it’s going to have an affect on us,” the trader said. “But the government market seems to be moving forward, which is pushing our scale up. Most of the buyers have not followed suit.”
In the new-issue market yesterday, DASNY competitively sold $800 million of state taxable personal income tax revenue BABs to Bank of America Merrill Lynch.
The bonds mature from 2022 through 2024, and in 2030 and 2040. Yields range from 4.75% in 2022, or 3.09% after the 35% federal subsidy, to 5.60% in 2040, or 3.64% after the subsidy.
The credit is rated AAA by Standard & Poor’s and AA by Fitch Ratings.
Wells Fargo Securities priced $503.4 million of service contract revenue refunding bonds for the Empire State Development Corp. in two subseries.
Bonds from the $223.6 million Subseries A-1 mature from 2011 through 2022, with yields ranging from 0.95% with a 3% coupon in 2012 to 3.68% with a 5% coupon in 2022. Bonds maturing in 2011 were not formally re-offered.
Bonds from the $279.8 million Subseries A-2 mature from 2011 through 2022, with yields ranging from 0.95% with a 4% coupon in 2012 to 3.68% with a 5% coupon in 2022. Bonds maturing in 2011 were not formally re-offered.
The bonds, which are callable at par in 2020, are rated AA-minus by both Standard & Poor’s and Fitch.
JPMorgan priced $422.2 million of state lottery revenue bonds for Arizona.
The bonds mature from 2013 through 2029, with yields ranging from 1.55% with a 3% coupon in 2013 to 4.44% with a 5% coupon in 2029.
The bonds are callable at par in 2020, except bonds maturing in 2020, which are not callable.
They are insured by Assured Guaranty Municipal Corp. The underlying credit is rated A1 by Moody’s Investors Service and AA-minus by Standard & Poor’s.
The Treasury market showed losses yesterday. The benchmark 10-year Treasury note finished at 3.20% after opening at 3.16%.
The 30-year Treasury bond finished at 4.10% after opening at 4.05%. The two-year Treasury note finished at 0.83% after opening at 0.78%.
The Municipal Market Data triple-A scale yielded 2.76% in 10 years and 3.62% in 20 years yesterday, following levels of 2.76% and 3.61% on Tuesday. The scale yielded 3.96% in 30 years yesterday, versus 3.93% on Tuesday.
Tuesday’s triple-A muni scale in 10 years was at 86.8% of comparable Treasuries and 30-year munis were at 96.6%, according to MMD, while 30-year tax-exempt triple-A general obligation bonds were at 101.6% of the comparable London Interbank Offered Rate.
Elsewhere in the new-issue market yesterday, the Southern California Public Power Authority competitively sold $191 million of taxable BABs to Citi.
The bonds mature in 2030 and 2040, yielding 5.84% and 5.94%, or 3.80% and 3.86% after the 35% federal subsidy, all priced at par.
The bonds were priced to yield 170 and 180 basis points over the comparable Treasury yield, and feature an unspecified make-whole call.
The credit is rated Aa3 by Moody’s and AA-minus by Standard & Poor’s and Fitch.
JPMorgan priced $106.2 million of revenue bonds for the Illinois Finance Authority.
The bonds mature in 2015 and 2040, yielding 2.44% with a 5% coupon and 4.93% with a 5.25% coupon.
The bonds, which are callable at par in 2020, are rated A1 by Moody’s and A-plus by Standard & Poor’s.
Fort Lauderdale, Fla., competitively sold $82.3 million of water and sewer revenue bonds to Wells Fargo.
The bonds mature from 2011 through 2033, with term bonds in 2036 and 2038. Yields range from 0.50% with a 3% coupon in 2011 to 4.60% with a 4.5% coupon in 2038.
The bonds, which are callable at par in 2019, are rated Aa1 by Moody’s and AA by Standard & Poor’s.
In economic data released yesterday, new home sales jumped 14.8% in April to a seasonally adjusted annual rate of 504,000.
Economists expected 420,000 new home sales for the month, according to the median estimate from Thomson Reuters.
Priti Patnaik contributed to this column.
