The municipal market was mixed yesterday.
"The market's sort of sideways right now," a trader in New York said. "We got some stronger data, and we've got this big new-issue calendar ahead of us, so people are hanging back a bit."
The Treasury market was mixed. The yield on the benchmark 10-year Treasury note, which opened at 3.47%, finished at 3.49%. The yield on the two-year note was quoted near the end of the session at 1.73% after opening at 1.74%.
Although the largest new deal this week involves $2 billion of taxable general obligation bonds from Connecticut, the calendar is also chock full of sizable new tax-exempt deals as the market makes room for an estimated $8.5 billion of competitive and negotiated volume.
The Connecticut deal will be priced tomorrow by Bear, Stearns & Co. after the firm takes indications of interest from institutional investors, which they began doing yesterday and will continue doing today. Bear also held a week-long retail order period last week on the sale, the proceeds of which will be used to bolster the state teacher's retirement fund. A $1.6 billion series of current interest bonds matures from 2014 through 2028, with a term bond in 2032. During the retail order period, yields ranged from 4.20% in 2014 to 5.20% in 2025, all priced at par.
The remaining bonds were not offered during the retail order period. Additionally, a $400 million series of capital appreciation bonds matures from 2014 through 2025. Only bonds maturing in 2014 and 2018 were offered during the retail order period. The credit is rated Aa3 by Moody's Investors Service and AA by both Standard & Poor's and Fitch Ratings.
In the new-issue market yesterday, Banc of America Securities LLC priced $475 million of general obligation bonds for New York City. The bonds were slated for retail pricing yesterday, but retail orders were cut off during the session, and the deal was priced for institutional investors. Market sources indicated that more than 50% of the bonds were sold during a three-day retail order period, which began Thursday. The bonds mature from 2012 through 2027, with a term bond in 2029. Yields range from 3.00% with a 4% coupon in 2012 to 4.72% with a 4.7% coupon in 2029. The bonds, which are callable at par in 2018, are rated Aa3 by Moody's, AA by Standard & Poor's, and AA-minus by Fitch.
Goldman, Sachs & Co. priced $161.9 million of revenue bonds for the Dormitory Authority of the State of New York, to benefit the Memorial Sloan-Kettering Cancer Center. The bonds mature in 2035 and 2036, yielding 4.66% with a 4.5% coupon and 4.68% with a 5% coupon, respectively. The bonds, which are callable at par in 2018, are rated Aa2 by Moody's and AA by Standard & Poor's and Fitch.
Later this week, Sacramento County, Calif., is earmarked to sell $641 million of tax-exempt airport system revenue bonds on Thursday in a negotiated deal being senior-managed by Morgan Stanley. The deal, which is insured by Financial Security Assurance Inc., will finance the airport system's capital improvement and modernization plan from 2009 to 2013, totaling $1.4 billion.
The larger portion of Series 2008 will be comprised of senior revenue bonds and will consist of $546.9 million, maturing in three subseries: $347.4 million subject to the alternative minimum tax, $186.4 million of non-AMT, and $13 million of taxable. The smaller portion of Series 2008 will total $93.9 million and be comprised of subordinate revenue bonds and passenger facility charge revenue refunding bonds. Two subseries will be made up of $45.2 million of AMT bonds and $48.7 million of non-AMT bonds.
In a weekly report, George Friedlander, managing director and fixed-income strategist at Citi, wrote: "We suspect that the biggest part of the muni market rally is over, at least for now, but see little reason for a backup in yields unless Treasuries get hit hard."
"The muni calendar appears large given The Bond Buyer's 30-day visible supply, which is at $15.6 billion, but as has been the case recently, relatively little of it is in the first of fixed-rate long-maturity bonds," Friedlander added. "To be sure, [this] week should provide something more of a test, with a few more sizeable long-term issues on the calendar, but the market seems well-positioned to handle it. So, in our view, a return to a relatively narrow trading range seems likely, after the impressive rally."
In economic data released yesterday, retail sales rose 0.2% in March after a revised 0.4% dip in February. Additionally, retail sales excluding autos climbed 0.1% in March after a revised 0.1% dip the month before. Economists polled by IFR Markets had predicted no change in retail sales and a 0.2% uptick in retail sales excluding autos.
Business inventories were up 0.6% and sales levels fell 1.1% in February. Inventories rose to $1.468 billion following an upwardly revised 0.9% gain in January. IFR had projected that business inventories would be up 0.6% in the month. Meanwhile, the 1.1% decrease in overall business sales brought the category to $1.143 billion. The February figure followed a downwardly revised 1.3% increase in January, and compared to IFR's projected 1.5% decrease.
