The municipal market absorbed several of the week's largest primary offerings without losing much ground as it was unchanged with a slightly firmer tone yesterday when the Federal Open Market Committee again held the federal funds rate target unchanged.In the new-issue market yesterday, Morgan Stanley priced $800 million of future tax-secured subordinate bonds for the New York City Transitional Finance Authority. The bonds mature from 2010 through 2024, with yields ranging from 0.93% with a 2% coupon in 2011 to 4.08% with a 5% coupon in 2024. Bonds maturing in 2010 were not formally re-offered. The bonds, which are callable at par in 2019, are rated Aa2 by Moody's Investors Service, AAA by Standard & Poor's, and AA-plus by Fitch Ratings.
Merrill, Lynch & Co. priced $775.2 million of toll bridge revenue bonds for California's Bay Area Toll Authority. The bonds mature from 2019 through 2029, with term bonds in 2034, 2039, and 2044. Yields range from 3.60% with a 3.5% coupon in 2019 to 5.12% with a 5.625% coupon in 2044. The bonds, which are callable at par in 2019, are rated Aa3 by Moody's, AA by Standard & Poor's, and AA-minus by Fitch.
The Federal Open Market Committee yesterday held the federal funds rate target unchanged at a range of 0% to 0.25% for the sixth consecutive meeting, which was widely expected among market participants. In the FOMC's accompanying statement, it stressed a commitment to leaving the rate "at exceptionally low levels ... for an extended period of time."
In a written comment, Guy LeBas, fixed-income strategist at Janney Montgomery Scott LLC, wrote that, with yesterday's statement, "the FOMC once again fulfilled its traditional role as the head-in-sand ostrich, this time, not by failing to acknowledge the depths of the problem, but rather by being hesitant to see light at the end of the tunnel."
"Yes, our economic outlook is somewhat short of cheery, but Fed policymakers are starting to look like Catch-22's Captain Orr - intelligent and well-armed with a solid plan, but seemingly oblivious to the day-to-day reality beyond their own spectacles," he wrote. "Just five short days ago, the Labor Department noted that job losses slowed to the best pace in nearly a year; our analysis suggests that the liquidity-driven payroll declines have now fully worked their way through the system. While the world's not yet hunky-dory, things are getting better, right? You'd certainly never know if from reading [yesterday's] monetary policy statement."
Traders said tax-exempt yields in the secondary market were unchanged, though with a slightly firmer tone.
"There's maybe a bit of a firmer tone out there, but it's still largely quiet," a trader in New York said. "Overall, I'd say we're mostly flat, though out long particularly you can maybe pick up a basis point or two. Activity has picked up a tiny bit, it seems, though it's still not incredibly active. But I think guys are a little more willing to do something, at least it feels that way, but it's still quiet."
The Treasury market showed some losses yesterday. The yield on the benchmark 10-year Treasury note, which opened at 3.66%, finished at 3.71%. The yield on the two-year note finished at 1.17%, after opening at 1.16%. And the yield on the 30-year bond, which opened at 4.43%, finished at 4.53%.
As of Tuesday's close, the triple-A muni scale in 10 years was at 80.1% of comparable Treasuries, according to Municipal Market Data. Additionally, 30-year munis were 103.8% of comparable Treasuries. Also, as of Tuesday's close, 30-year tax-exempt triple-A rated general obligation bonds were at 106.7% of the comparable London Interbank Offered Rate.
Elsewhere in the new-issue market, Kentucky's Louisville and Jefferson County Metropolitan Sewer District competitively sold $242 million of sewer and drainage system revenue bonds to Citi, with a true interest cost of 3.81%. The bonds mature from 2010 through 2023, with yields ranging from 1.65% with a 4% coupon in 2012 to 4.30% with a 5% coupon in 2023. Bonds maturing in 2010 and 2011 were not formally re-offered. The bonds, which are callable at par in 2019, are rated A2 by Moody's and AA-minus by Standard & Poor's.
JPMorgan priced $223.3 million of revenue refunding bonds for the Michigan State Building Authority. The bonds mature from 2009 through 2026, with yields ranging from 1.88% with a 3% coupon in 2010 to 5.39% with a 5.25% coupon in 2026. Bonds maturing in 2009 were decided via sealed bid. Bonds maturing from 2022 through 2026 are insured by Assured Guaranty Corp. The underlying credit is rated A1 by Moody's, A-plus by Standard & Poor's, and A by Fitch.
JPMorgan also priced for retail investors $200 million of school facilities construction bonds for the New Jersey Economic Development Authority. The bonds mature from 2011 through 2030, with a term bond in 2034. Yields range from 1.48% with a 3% coupon in 2011 to 5.00% priced at par in 2030. Bonds maturing in 2021, 2022, 2024, 2025, from 2027 through 2029, and in 2034 were not offered during the retail order period. The bonds, which are callable at par in 2019, are rated A1 by Moody's, AA-minus by Standard & Poor's, and A-plus by Fitch.
The economic calendar was light.