The municipal market was largely unchanged yesterday amid somewhat light secondary-market activity.
“It’s fairly quiet,” a trader in New York said. “There are some bits and pieces trading, but there isn’t a whole lot going on out there. We’re pretty flat at this point.”
“It’s just a quiet Monday, really,” a trader in Los Angeles said. “We should see a decent uptick in activity the remainder of the week, but we’re starting out this week fairly quiet and unchanged.”
The Treasury market showed little movement yesterday. The benchmark 10-year note finished at 3.61% after also opening at 3.61%. The yield on the two-year was quoted near the end of the session at 0.81% after also opening at the same level. The yield on the 30-year bond finished at 4.56% after also opening at 4.56%.
The Municipal Market Data triple-A scale yielded 2.84% in 10 years and 3.80% in 20 years yesterday, matching Friday’s levels. The scale yielded 4.16% in 30 years yesterday, also matching Friday.
Friday’s triple-A muni scale in 10 years was at 78.9% of comparable Treasuries and 30-year munis were at 91.6%, according to MMD, while 30-year tax-exempt triple-A general obligation bonds were at 95.9% of the comparable London Interbank Offered Rate.
After digesting more than $6 billion of new volume last week, the municipal market is again expected to make room for an additional $6.28 billion in estimated new supply planned this week, according to Ipreo LLC and The Bond Buyer.
This week’s primary activity will be led by a $2.4 billion revenue bond sale from the Municipal Electric Authority of Georgia, which consists of both tax-exempt debt and taxable Build America Bonds. Goldman, Sachs & Co. will price the deal.
The deal includes Project J bonds that total $1.14 billion and consist of $1.11 billion of taxable BABs in Series 2010A that mature from 2018 to 2057, and $26.6 million of tax-exempt bonds in Series 2010B to mature from 2017 to 2021 and in 2040.
There are also Project M bonds that total $972.9 million and consist of $953.2 million of taxable BABs in Series 2010A to mature from 2019 to 2057, and $19.7 million of tax-exempt bonds in Series 2010B to mature from 2017 to 2029 and in 2040.
The MEAG deal also includes Project P bonds that total $419.1 million. They are structured as $410.8 million of taxable BABs in Series 2010A to mature from 2018 to 2057, and $8.24 million of tax-exempts in Series 2010B maturing from 2017 to 2020 and in 2040.
The Series J and M bonds are expected to be rated A2 by Moody’s Investors Service and A-plus by Standard & Poor’s and Fitch Ratings. The Series P bonds are rated Baa2 by Moody’s and A-minus by Standard & Poor’s and Fitch.
Proceeds from the billion-dollar sale will be used to finance the construction of new projects, including MEAG’s share of two new nuclear units at its Plant Vogtle facility.
The Dormitory Authority of the State of New York, meanwhile, will make its second appearance in the primary market in as many weeks as it prepares to issue $634.4 million of personal income tax general-purpose revenue bonds. The negotiated deal will be led by RBC Capital Markets tomorrow following a retail order period today.
The three-pronged deal includes $373.9 million of tax-exempt bonds in Series 2010A, $46.7 million of traditional taxable bonds in Series 2010B, and $213.7 million of taxable BABs in Series 2010 C.
The issue is expected to be rated AAA by Standard & Poor’s and AA-minus by Fitch.
New-money proceeds from Series 2010A are being used to finance capital grants and various environmental and infrastructure projects.
New-money proceeds from Series 2010B will be used to fund capital expenditures for environmental infrastructure projects, and provide state matching contributions for the water-pollution control state revolving fund and the Western New York Nuclear Service Center.
A portion of both the Series A and B bonds will also be used to current refund $333 million of the authority’s outstanding mental health services revenue bonds issued as auction-rate securities and variable-rate demand bonds.
In economic data released yesterday, personal income rose 0.1% in January, while personal consumption increased 0.5% as disposable personal income fell for the first time since July.
Core PCE, which excludes food and energy costs, was flat for the month and increased 1.4% from a year ago following a 1.5% year-over-year increase in December.
Personal consumption increased a revised 0.3% in December. Income was revised lower to a 0.3% rise.
Economists expected consumption and income to each increase 0.4%, according to the median estimate from Thomson Reuters. Economists estimated the PCE deflator would be flat for the month.
According to the Institute for Supply Management’s monthly report on business, the ISM index dipped to 56.5 in February from 58.4 in January.
Economists polled by Thomson predicted the index would fall to 57.5.
Construction spending declined 0.6% in January to a seasonally adjusted annual rate of $884.1 billion, the fourth consecutive monthly drop.
Economists expected construction spending to fall 0.7% in January, according to the median estimate from Thomson Reuters.