The municipal market was unchanged to slightly weaker yesterday, starting the new week quietly after last week’s tremendous volatility, while underwriters postponed this week’s San Francisco International Airport deal.
“There’s been a bit of weakness, following Treasuries, but not much to speak of,” a trader in Los Angeles said. “I’d say it’s a basis point weaker at most.”
In the new-issue market yesterday, the San Francisco Airport Commission opted to postpone its upcoming deal sale to market conditions. The deal was to be sold in two portions — $260 million to $300 million of fixed-rate debt to be priced by Citi, and a $170 million tranche of variable-rate demand obligation bonds of which Citi will price the $69 million Series A, while Banc of America Securities LLC and Morgan Stanley will each price $50.8 million of Series B and Series C bonds.
“We had a meeting with our underwriters Friday and they basically recommended that we let this market settle out a bit,” said Vincent McCarley of Backstrom McCarley Berry & Co, a financial adviser to the airport. “That’s the reason we’re going in this direction.”
The deal, which was scheduled to be priced on tomorrow or Thursday, was slated to be the week’s largest offering. The commission’s VRDO deal is now slated March 26, and the fixed rate will be day-to-day, officials say.
Trades reported by the Municipal Securities Rulemaking Board yesterday showed little movement. A dealer sold to a customer Ambac Assurance Corp.-insured Port Authority of New York and New Jersey 4.5s of 2034 at 4.58%, even with where they were sold Friday. A dealer sold to a customer Financial Guaranty Insurance Corp.-insured Golden State Tobacco Securitization Corp. 5s of 2035 at 5.04%, even with where they traded Friday. A dealer sold to a customer Florida State Board of Education 5s of 2012 at 2.68%, down one basis point from where they were sold Friday.
The Treasury market showed some losses yesterday. The yield on the benchmark 10-year Treasury note, which opened at 3.56%, finished at 3.61%. The yield on the two-year note was quoted near the end of the session at 2.22%, after opening at 2.19%.
In economic data released yesterday, new home sales came in at 604,000 in December after a revised 634,000 the previous month. Economists polled by IFR Markets had predicted 645,000.
Other economic data will be released later this week, most importantly with Friday’s release of January non-farm payrolls. Durable goods orders for December and the January consumer confidence index will be released today. The advance fourth-quarter gross domestic product reading will be released tomorrow. Initial jobless claims for the week ended Jan. 26, continuing jobless claims for the week ended Jan. 19, December personal income, December personal consumption, the December core personal consumption expenditures deflator, and the January Chicago purchasing managers index will be released Thursday. On Friday, in addition to non-farm payrolls, the January Institute for Supply Management business activity composite index will be released, along with the final January University of Michigan consumer sentiment index.
Economists polled by IFR are predicting 58,000 new jobs were created in January. They are also predicting a 1.6% rise in durable goods orders, no change in orders excluding transportation, an 87.5 reading in the consumer confidence index, 1.2% growth in GDP, 318,000 initial jobless claims, 2.675 million continuing jobless claims, a 0.4% uptick in personal income, a 0.1% increase in personal consumption, 2.2% growth in the core PCE deflator, a 52.0 Chicago PMI reading, a 47.0 reading in the ISM index, and a 79.0 consumer sentiment reading.
Also this week, the Federal Open Market Committee will hold its meeting on interest rates. The FOMC will meet today and tomorrow to determine whether or not it wishes to follow up on its 75-basis-point emergency slashing of the federal funds rate target this week, which dropped it to 3.50%.
In other new-issue market activity, Goldman, Sachs & Co. priced $237 million of limited-tax general obligation bonds for King County, Wash. The bonds mature from 2009 through 2028, with a term bond in 2034. Yields range from 2.38% with a 5% coupon in 2011 to 4.72% with a 4.75% coupon in 2034. Bonds maturing in 2009 and 2010 were decided via sealed bid. The bonds, which are callable at par in 2018, are rated Aa1 by Moody’s Investors Service, AAA by Standard & Poor’s, and AA-plus by Fitch Ratings.
Pasadena, Calif., competitively sold $57.7 million of electric revenue bonds to Morgan Stanley, with a true interest cost of 4.43%. The bonds mature from 2009 through 2028, with term bonds in 2031, 2036, and 2037. Yields range from 2.15% with a 4% coupon in 2009 to 4.25% with a 5% coupon in 2037. The bonds, which are insured by Assured Guaranty Corp., are callable at par in 2017. The underlying credit is rated A-plus by Standard & Poor’s and AA-minus by Fitch.