Munis Unchanged to Slightly Firmer

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The municipal market was unchanged to slightly firmer yesterday.

"There has been some scattered buying by some of the retailers, and the institutions are fairly quiet. There's not a lot coming this week, because it's a short week," a trader in Los Angeles said. "The market itself feels good to me, certainly some of the levels I'm seeing on the bid side are hanging right in there from Friday, and in one or two cases maybe up a bit. So I would say the market is in general unchanged, but in spots probably up a basis point or two."

The Treasury market showed gains yesterday. The yield on the benchmark 10-year Treasury note, which opened at 3.85%, finished at 3.82%. The yield on the two-year note was quoted near the end of the session at 2.39%, after opening at 2.44%.

Also yesterday, the Supreme Court yesterday overturned a Kentucky appellate court ruling and protected a long-held status quo, when it determined that states can tax interest on bonds issued out of state while exempting interest on its own without violating the commerce clause of the Constitution.

Traders said the market showed little reaction to the decision, as it was "pretty much expected, for the most part."

"There was probably a collective small sigh of relief," a trader in Los Angeles said. "It's one of those things where you never know what the Supreme Court is going to do, but their 7-to-2 vote pretty much indicates that they think pretty much like people in the bond business think. But I didn't see very much going on after it, and I didn't hear a lot of anticipation for the decision leading it up to it."

In economic data released yesterday, the composite index of leading economic indicators rose 0.1% in April, after increasing an unrevised 0.1% in March. The LEI stands at 102.0. Economists polled by IFR Markets predicted LEI would be off 0.1% in the month.

Later this week, a slate of economic data will be released. Today, the April producer price index will be released, followed Thursday by initial jobless claims for the week ended May 17 and continuing jobless claims for the week ended May 10. And on Friday, April existing home sales will be released.

Economists polled by IFR are predicting a 0.4% rise in PPI, a 0.2% gain to the PPI core, 370,000 initial jobless claims, 3.065 million continuing jobless claims, and 4.850 million existing home sales.

A handful of sizable deals will make their way to the primary market this week as the municipal market begins to show signs of the seasonal lull in volume that is typical ahead of the Memorial Day holiday next week.

Volume this week is expected to total an estimated $5.42 billion, compared with last week when the market saw a revised $7.50 billion in supply, according to Thomson Reuters. The sharpest decline in volume this week is represented by the drop in planned negotiated sales, which is estimated at $3.33 billion compared with a revised $6.04 billion last week.

While May has been relatively lackluster so far, April was a record month as its volume was revised to $51.5 billion after preliminary data indicated that monthly volume totaled approximately $43.8 billion.

Heading up the new-issue calendar this week is a $541 million bond sale for the Massachusetts Health and Education Facilities Authority. Citi will price that deal, which contains maturities from 2009 through 2038, tomorrow. The bonds are rated A3 by Moody's Investors Service and BBB-plus by Standard & Poor's.

Also coming up this week, Morgan Stanley today will price $422 million of bonds for Colorado's E-470 Public Highway Authority, and Pennsylvania will competitively sell $405 million of general obligation bonds today.

Additionally, Goldman, Sachs & Co. will price $275 million of bonds for Houston tomorrow, San Francisco will competitively sell $275 million of tax-exempt and taxable GO refunding bonds tomorrow in two series, and Merrill Lynch & Co. Thursday will price $200 million of bonds for the New Jersey Educational Facilities Authority.

In the new-issue market yesterday, Banc of America Securities LLC priced for retail investors $143.6 million of mortgage revenue bonds for North Carolina's Johnston Memorial Hospital Authority. The bonds mature from 2011 through 2019, with term bonds in 2024, 2028, and 2036. Yields range from 3.07% with a 4% coupon in 2011 to 4.20% with a 4% coupon in 2019. Bonds maturing in 2024, 2028, and 2036 were not offered during the retail order period. The bonds, which are callable at par in 2018, are insured by Financial Security Assurance Inc.

Morgan Stanley priced $96.8 million of fixed-rate revenue refunding bonds for the Illinois Finance Authority. The bonds mature from 2012 through 2018, with term bonds in 2023, 2028, and 2035. Yields range from 3.85% with a 5% coupon in 2012 to 5.38% with a 5.25% coupon in 2035. The bonds, which are callable at par in 2018, are insured by MBIA Insurance Corp. The underlying credit is rated A3 by Moody's and A-minus by both Standard & Poor's and Fitch.

 

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