The municipal market was mostly flat Wednesday as nearly $800 million of debt from Washington led the way in a lightly traded, primary-driven session.
“There were the few new issues that people were paying attention to, but interest in the secondary, particularly from institutions, was pretty light,” a trader in New York said. “I’d say we’re fairly flat overall. I didn’t really see anything out there that would compel me to say the scale should be moved in either direction.”
In the new-issue market, Washington competitively sold $795.4 million of general obligation debt in two series.
Bonds from the larger $401.4 million series were sold to Wells Fargo Securities and mature in 2011 and from 2013 through 2027. Yields range from 1.63% with a 5% coupon in 2016 to 3.46% with a 4% coupon in 2027. Bonds maturing from 2011 through 2015, in 2017, and from 2019 through 2022 were not formally re-offered. The bonds are callable at par in 2020.
Bonds from the smaller $394.0 million series were sold to Bank of America Merrill Lynch and mature from 2011 through 2027. Yields range from 0.71% with a 5% coupon in 2013 to 3.54% with a 3.5% coupon in 2027. Bonds maturing in 2011, 2012, 2014, 2017, 2020, and 2021 were sold but not available. The bonds are callable at par in 2020.
The credit is rated Aa1 by Moody’s Investors Service and AA-plus by both Standard & Poor’s and Fitch Ratings.
The Municipal Market Data triple-A scale yielded 2.39% in 10 years and 3.33% in 20 years Wednesday, matching Tuesday. The scale yielded 3.73% in 30 years Wednesday, following 3.72% Tuesday.
“There were little pockets of firmness and little pockets of weakness,” a trader in San Francisco said. “Overall, I wouldn’t call it anything but flat.”
In eight of the past 10 sessions, at least one of the 10-, 20-, or 30-year yields have risen. Before the recent sell-off, yields dropped to all-time lows in 10-year munis 12 times in the previous 17 sessions. Also, 30-year tax-exempts set record lows four times in the previous eight sessions, while 20-year munis established all-time lows five times over the same time period.
The record lows currently stand at 2.17% and 3.67% in 10- and 30-year tax-exempts, both established Aug. 25. The 20-year low of 3.28% was set Aug. 31.
Wednesday’s triple-A muni scale in 10 years was at 88.2% of comparable Treasuries and 30-year munis were at 96.4%, according to MMD, while 30-year tax-exempt triple-A GO bonds were at 106.6% of the comparable London Interbank Offered Rate.
“You maybe picked up a basis point in the belly of the curve and maybe lost a basis point out long,” the San Francisco trader said. “There wasn’t really a lot of trading today.”
The Treasury market showed losses Wednesday. The benchmark 10-year note finished at 2.73% after opening at 2.68%.
The 30-year bond finished at 3.88% after opening at 3.80%. The two-year note finished at 0.50% after opening at 0.49%.
Elsewhere in the new-issue market Wednesday, Goldman, Sachs & Co. priced $440.9 million of state personal income tax revenue bonds for the New York State Thruway Authority.
The bonds mature from 2011 through 2030, with yields ranging from 0.53% with a 2% coupon in 2012 to 3.68% with a 5% coupon in 2030. Bonds maturing in 2011 were decided via sealed bid. The bonds, callable at par in 2020, are rated AAA by Standard & Poor’s and AA by Fitch.
Ziegler Capital Markets priced $190.1 million of revenue bonds for Michigan’s Kalamazoo Hospital Finance Authority in two series.
Bonds from the larger $114.8 million series mature in 2020, 2025, 2030, and 2036. Yields range from 3.90% with a 5% coupon in 2020 to 5.10% with a 5.25% coupon in 2036. The bonds are callable at par in 2020 and are rated A2 by Moody’s.
Bonds from the smaller $75.3 million series mature from 2011 through 2022, with term bonds in 2025, 2030, and 2036. Yields range from 1.50% with a 2% coupon in 2012 to 4.85% with a 5.25% coupon in 2036. The bonds are callable at par in 2020 and are insured by Assured Guaranty Municipal. The underlying credit is rated Aa2 by Moody’s.
In economic data released Wednesday, industrial production decelerated in August as the pace of growth slowed to 0.2% from 0.6% in July, the Federal Reserve Board reported Wednesday. The gain matched economists’ expectations.
Industrial capacity utilization — a measure of factory usage — rose to 74.7% from 74.6%, and is 4.7 percentage points higher than a year ago. Economists expected it to reach 75%, according to the median estimate from Thomson Reuters.
A gauge of New York-area manufacturing activity fell more than economists expected in September, declining to a 14-month-low of 4.14, according to a report Wednesday by the Federal Reserve Bank of New York.
Readings above zero indicate expansion in the Empire State Manufacturing Survey, which tracks New York, southern Connecticut, and northern New Jersey. Economists surveyed by Thomson had expected the general business conditions index to increase to 8.2 from an August reading of 7.1.
Import prices rose 0.6% in August to post a second straight monthly increase and the largest gain in four months, the Labor Department reported Wednesday. Economists polled by Thomson Reuters expected an increase of 0.3%, according to the median estimate.
