The municipal market was slightly firmer yesterday amid light to moderate activity in the secondary.
“We’re seeing some mild gains,” a trader in New York said. “We’re probably better a basis point or two right now. But it’s fairly quiet. There isn’t a whole lot trading just yet.”
“We could be better by as much as three or four basis points on the short end, but there’s not much movement out long,” a trader in Los Angeles said. “Out past 20 years, we’re maybe better a basis point at most.”
In the new-issue market yesterday, Bank of America Merrill Lynch priced a $1.04 billion sale of general airport revenue bonds for Chicago, on behalf of O’Hare International Airport.
A $578 million series of taxable Build America Bonds matures in 2038 and 2040, which contains a split maturity, yielding 6.845% in 2038, or 4.45% after the 35% federal subsidy, and 6.395% and 6.145% in 2040, or 4.16% and 3.99% after the subsidy, all priced at par. The latter 2040 maturity is insured by Assured Guaranty Municipal Corp. The remaining bonds are uninsured.
The bonds, were priced to yield between 145 and 215 basis points over the comparable Treasury yield. The 2038 maturity is callable at par in 2020. The 2040 maturity is subject to a make-whole call at Treasuries plus 30 basis points.
A $48 million series of taxable debt matures from 2019 through 2028, with a term bond in 2031. Yields range from 5.272% in 2019 to 6.395% in 2031, all priced at par. The bonds were priced to yield between 145 and 250 basis points over the comparable Treasury yields. They are subject to a make-whole call at Treasuries plus 35 basis points.
Pricing information for the remaining series was not available by press time.
The credit is rated A1 by Moody’s Investors Service, A-minus by Standard & Poor’s, and A by Fitch Ratings.
The Treasury market mostly showed losses yesterday. The benchmark 10-year note was quoted near the end of the session with a yield of 3.86% after opening at 3.82%. The yield on the two-year finished at 1.06% after opening at 1.05%. The yield on the 30-year bond finished at 4.73% after opening at 4.68%.
The Municipal Market Data triple-A scale yielded 3.06% in 10 years and 3.85% in 20 years Tuesday, compared with Monday’s levels of 3.10% and 3.85%. The scale yielded 4.15% in 30 years yesterday, following 4.16% on Tuesday.
Tuesday’s triple-A muni scale in 10 years was at 81.4% of comparable Treasuries and 30-year munis were at 88.9%, according to MMD, while 30-year tax-exempt triple-A general obligation bonds were at 93.7% of the comparable London Interbank Offered Rate.
Elsewhere in the new-issue market yesterday, Barclays Capital priced $190.3 million of revenue bonds for the Pennsylvania Higher Educational Facilities Authority on behalf of Temple University.
Bonds from the $46.7 million tax-exempt Series A mature from 2011 through 2021, with yields ranging from 1.36% with a 4% coupon in 2012 to 4.08% with a 5% coupon in 2021. Bonds maturing in 2011 were decided via sealed bid. The bonds are callable at par in 2020.
Bonds from the $143.6 million taxable Series B BABs mature from 2016 through 2025, with term bonds in 2030 and 2040. Yields ranged from 4.21% in 2016, or 2.74% after the 35% federal subsidy, to 6.29% in 2040, or 4.09% after the subsidy, all priced at par. The bonds were priced to yield between 95 and 185 basis points over the comparable Treasury yields, and have a make-whole call at Treasuries plus 35 basis points.
The credit is rated A1 by Moody’s and A-plus by Standard & Poor’s.
Bank of America Merrill priced $107.1 million of clean water state revenue bonds for the Virginia Resources Authority in two series.
Bonds from the $98.8 million series mature from 2013 through 2032, with yields ranging from 1.32% with a 3% coupon in 2013 to 4.10% with a 5% coupon in 2032. The bonds are callable at par in 2020.
Bonds from the $8.3 million series mature in 2011 and were decided via sealed bid. The bonds are not callable.
The credit is rated MIG-1 by Moody’s, SP-1-plus by Standard & Poor’s, and F1-plus by Fitch.
In economic data released yesterday, the consumer price index increased 0.1% on a seasonally adjusted basis in March, in line with economists’ estimates, as year-over-year core inflation was the lowest in six years.
Core prices, excluding food and energy costs, were unchanged in March following an unrevised 0.1% core increase in February. For the year ending in March, core prices increased 1.1%, the smallest increase since January 2004.
Economists expected headline and core CPI to each increase 0.1%, according to the median estimate from Thomson Reuters.
Retail sales jumped 1.6% in March, beating analysts’ expectations in large part due to a 6.7% rise in motor vehicle and parts sales. Excluding autos, retail sales increased 0.6%, also well above economists’ estimates.
Economists polled by Thomson had expected retail sales to rise 1.2% for the month and for sales excluding autos to increase 0.5%, according to the median estimate from Thomson Reuters.
Business inventories increased 0.5% in February, slightly above analysts’ expectations. The 0.5% rise follows a revised 0.2% uptick in January. Economists expected inventories to rise 0.4% during February, according to the median estimate from Thomson Reuters.