The municipal market was slightly firmer yesterday amid light secondary market trading activity.Traders said tax-exempt yields were lower by about two basis points overall
"There's not a whole lot going on right now, but it feels a bit firmer," a trader in New York said. "I'd say we're better a good basis point or two at this point."
"People are pretty much winding down for the holiday at this point, but we're doing a bit better," a trader in Los Angeles said. "I'd call it better by maybe two basis points, but there's not much trading to speak of. Most of the firmness is out long, it's fairly unchanged up to about 10 years out. But overall, I'd say we picked up a couple basis points."
The Treasury market was mixed yesterday. The yield on the benchmark 10-year note, which opened at 3.53%, was quoted near the end of the session at 3.55%. The yield on the two-year note was quoted near the end of the session at 1.06% after opening at 1.11%. The yield on the 30-year bond, which opened at 4.33%, was quoted near the end of the session at 4.34%.
As of Tuesday's close, the triple-A muni scale in 10 years was at 90.5% of comparable Treasuries, according to Municipal Market Data. Additionally, 30-year munis were 106.9% of comparable Treasuries. Also, as of the close, 30-year tax-exempt triple-A general obligation bonds were at 112.6% of the comparable London Interbank Offered Rate.
In the new-issue market yesterday, Merrill Lynch & Co. priced $219.3 million of revenue bonds for Miami-Dade County to be used for a new stadium for Major League Baseball's Florida Marlins in multiple series.
Bonds from the $45.7 million series of capital appreciation bonds mature from 2011 through 2015, and in 2035, 2045, and 2039, with yields to maturity ranging from 3.25% in 2011 to 7.18% in 2035. Bonds maturing in 2045 and 2049 were not formally re-offered.
Bonds from a $40 million series of convertible capital appreciation bonds mature in 2034 and 2039, and were not formally re-offered.
Bonds from a $5.2 million taxable series mature in 2029, and were priced to yield 275 basis points over the comparable U.S. Treasury yield. Bonds from a $5 million taxable series also maturing in 2029 were priced to yield 275 basis points over the comparable U.S. Treasury yield.
Bonds from a $123.4 million series mature from 2022 through 2024, with term bonds in 2038 and 2039. Yields range from 5.16% with a 5% coupon in 2022 to 5.90% with a 5.75% coupon in 2039. The series also contains capital appreciation bonds maturing in 2012 through 2021, and in 2028, 2037, 2044, and 2048, with yields to maturity from 3.59% in 2012 to 6.75% in 2028. Bonds maturing in 2037, 2044, and 2048 were not formally re-offered.
The bonds are insured by Assured Guaranty Corp. The underlying credit is rated A2 by Moody's Investors Service, A-plus by Standard & Poor's, and A by Fitch Ratings.
Trades reported by the Municipal Securities Rulemaking Board yesterday showed gains. A dealer sold to a customer California 5s of 2032 at 6.15%, down one basis point from where they traded Tuesday. A dealer sold to a customer Georgia 5s of 2022 at 3.66%, two basis points lower than where they were sold Tuesday. A dealer bought from a customer Illinois 5s of 2027 at 5.00%, down two basis points from where they were sold Tuesday. A dealer bought from a customer District of Columbia Housing Finance Agency 5.875s of 2051 at 5.70%, one basis point lower than where they traded Tuesday. A dealer sold to a customer King County, Wash., 5s of 2035 at 5.14%, one basis point lower than where they were sold Tuesday.
In a weekly report, Matt Fabian, managing director at Municipal Market Advisors, wrote: "The market is being held back by low nominal yields among high-grade paper, ongoing liquidity issues, and dimming prospects for a rebound by the bond insurers."
"However, a more important factor is likely California's political crisis and the essentially unanswerable questions a situation of this magnitude presents," he wrote. "Thus, although the start of July is typically a favorable time for muni prices ... tax-exempts may have difficulty rallying while the state lacks budget resolution or if it is indeed forced to begin paying subordinate stakeholders with IOUs as threatened. As the month proceeds, bondholders should be wary of lower yields, as momentum remains an unpredictable guide to value in the current market."
In economic data released yesterday, construction spending fell 0.9% in May, after a revised 0.6% rise the previous month. Economists polled by Thomson Reuters had predicted a 0.5% drop.
The Institute for Supply Management's business activity composite index came in at 44.8 in June, after a 42.8 reading the previous month. Economists polled by Thomson Reuters had predicted a 44.5 reading.