The municipal market was mostly unchanged yesterday, with a slightly weaker tone, as the Federal Open Market Committee again held the federal funds rate target unchanged.
Traders said tax-exempt yields were flat to higher by one basis point in spots.
"We're mostly flat, but there's a bit of weakness here and there," a trader in New York said. "We're maybe down a basis point or so in spots, but it's pretty flat on the whole."
The Federal Open Market Committee yesterday held the federal funds rate target unchanged at its range of 0% to 0.25% for the 10th consecutive meeting, as was widely expected.
In a written comment, Guy LeBas, head of fixed-income strategy at Janney Montgomery Scott, said: "The expectation that the FOMC will leave the fed funds rate 'exceptionally low … for an extended period' is a hallmark of monetary policy that has helped the markets to maintain grounded expectations on short-term rates for a full 12 months now."
"In some sense, the reduction in that phrasing would leave a vacuum of information that the markets would certainly rush to fill with sandbags, opinions, and a move towards higher rates across the curve," LeBas wrote. "Once again, Thomas Hoenig dissented from the consensus opinion, encouraging just such a move, but the fact that the vast majority of FOMC members prefer to maintain the status quo now puts at risk our expectations of a rate hike by the fourth quarter of 2010."
In the new-issue market yesterday, market sources indicated that M.R. Beal & Co. priced $356.5 million of water and sewer system revenue bonds for the New York City Municipal Water Finance Authority. Pricing information was not available by press time.
The bonds were priced for retail Monday, maturing from 2016 through 2026, with term bonds in 2028 and 2030. Yields range from 2.21% with a 3% coupon in 2016 to 4.19% with a 5% coupon in 2030.
The bonds, which are callable at par in 2020, are rated Aa3 by Moody's Investors Service, AA-plus by Standard & Poor's, and AA by Fitch Ratings.
JPMorgan priced for retail investors $447.6 million of second series revenue refunding bonds for the San Francisco Airport Commission in two series.
Bonds from the larger $353.9 million series mature from 2014 through 2027, with yields ranging from 2.12% with a 3% coupon in 2015 to 4.42% with a 4.3% coupon in 2027. Bonds maturing in 2014 and 2015 were not offered during the retail order period and are insured by Assured Guaranty Municipal Corp. All the remaining bonds are uninsured. Portions of bonds maturing from 2016 through 2023 were not offered to retail investors.
Bonds from the smaller $93.7 million series mature from 2014 through 2027, with yields ranging from 1.57% with a 3% coupon in 2014 to 4.32% with a 4.25% coupon in 2027. Some bonds maturing in 2018 and 2019 were not offered during the retail order period.
The bonds are callable at par in 2020. The underlying credit is rated A1 by Moody's, A by Standard & Poor's, and A-plus by Fitch.
The Treasury market mostly showed gains yesterday. The benchmark 10-year note finished with a yield of 3.69% after opening at 3.70%. The yield on the two-year finished at 0.94% after also opening at 0.94%. The yield on the 30-year bond finished at 4.61% after opening at 4.63%.
