The municipal market was mostly unchanged with some long-end gains Thursday afternoon as yields began to stabilize after two consecutive volatile sessions.
Market participants continue to deal with uncertainty over the future of the Build America Bond program, which is set to expire Dec. 31.
Long-end yields rose more than 20 basis points on Tuesday and Wednesday, and 20-year yields climbed to a 17-month high.
However, traders said tax-exempts found some stability Thursday.
“We had two big moves two days in a row, but I’m getting a sense that people are generally comfortable where yields are for the time being,” a trader in New York said. “Obviously, we’re still going to be prone to big shifts if and when we get a definitive word on the fate of the BAB program, but I think we could stay at roughly these levels through the end of the week at least.”
A trader in Chicago said that secondary trading was light to moderate and yields were mostly flat.
“You can maybe pick up a basis point or two on the very long end, maybe 20 years and out, but aside from that, I’m calling it unchanged,” the Chicago trader said. “There is some business getting done, but on the whole, I’d say it’s not terribly active on the Street.”
In the new-issue market Thursday, the New York Liberty Development Corp. delayed its $1.3 billion tax-exempt revenue bond sale. Goldman, Sachs & Co. was set to price the deal Thursday, but market sources indicated the deal’s status has been shifted to day-to-day. No further information was available by press time.
The Municipal Market Data triple-A scale yielded 2.99% in 10 years Thursday, down one
basis point from Wednesday’s 3.00%, which was its highest level since 3.01% on Nov. 18, while the 20-year scale remained flat at 4.23%, its highest since July 7, 2009, when it was also 4.23%.
The scale for 30-year debt yielded 4.61%, declining one basis point from its highest mark since Nov. 17.
Thursday’s triple-A muni scale in 10 years was at 93.1% of comparable Treasuries and 30-year munis were at 104.8%, according to MMD.
Meanwhile, 30-year tax-exempt triple-A general obligation bonds were at 113.8% of the comparable London Interbank Offered Rate.
The Treasury market was firmer Thursday. The benchmark 10-year note finished at 3.22% after opening at 3.27%. The 30-year bond was quoted near the end of the session at 4.40%, after opening at 4.45%. The two-year note finished at 0.64% after opening at 0.63%.
The Treasury Department auctioned $13 billion of 30-year bonds Thursday with a 4.25% coupon at a 4.410% high yield, a price of 97.35. The bid-to-cover ratio was 2.74. The Federal Reserve banks also bought $189.1 million for their own account in exchange for maturing securities.
Elsewhere in the new-issue market, Bank of America Merrill Lynch priced $293.5 million of taxable BABs for California’s Orange County Local Transportation Authority.
The BABs mature from 2021 through 2025, with a term bond in 2041. The bonds are priced at par, with yields ranging from 5.563% in 2021, or 3.62% after the 35% federal subsidy, to 6.908% in 2041, or 4.49% after the subsidy.
The bonds were priced to yield between 235 and 325 basis points over the comparable Treasury yield.
The bonds, which are callable at par in 2020, are rated Aa2 by Moody’s Investors Service, AA-plus by Standard & Poor’s, and AA by Fitch Ratings.
Colorado competitively sold $500 million of tax and revenue anticipation notes to JPMorgan in two $250 million series. The two series yield 0.304% and 0.299%, each with 2% coupons.
The credit is rated MIG-1 by Moody’s and SP-1-plus by Standard & Poor’s.
Siebert Brandford Shank & Co. priced $100 million of taxable debt for the Michigan Finance Authority.
The bonds mature from 2014 through 2017, with term bonds in 2022 and 2035. Yields range from 5.129% in 2014 to 8.369% in 2035, all priced at par. The bonds were priced to yield between 325 and 400 basis points over the corresponding Treasury yields and contain an unspecified make-whole call.
The credit is rated A1 by Moody’s and AA-minus by Standard & Poor’s.
In economic data released Thursday, initial jobless claims dropped by 17,000 to 421,000 the week ending Dec. 4, as the four-week moving average for new filings declined afifth straight week.
Continuing claims dropped to 4,086,000 the week ending Nov. 27, the lowest level in more than two years. Economists expected 426,000 initial claims and 4.25 million continuing claims, according to Thomson Reuters.
Wholesale inventories and sales jumped in October, increasing 1.9% and 2.2% respectively.
Wholesale inventories of durable goods rose 0.9%, the largest increase since July, and inventories of nondurable goods jumped 3.2%. Total wholesale inventories have now expanded 10 straight months.
Wholesale sales rose 2.2% to post their largest gain since March and fourth consecutive monthly increase.
Economists predicted gains of 0.9% for wholesale inventories and 0.6% for wholesale sales.