The municipal market was unchanged to slightly weaker Friday amid fairly light secondary trading activity, as the New Jersey Economic Development Authority priced $140 million of taxable debt consisting mostly of Build America Bonds.
“We’re somewhat flat, but there is a bit of a weaker tone,” a trader in New York said. “There’s not really any movement out on the long end, but we’re maybe down a basis point or so in the belly of the curve. But there’s not a lot trading. It’s fairly quiet.”
“Things are cheapening up a little bit,” a trader in Los Angeles said. “It’s probably cheaper two, maybe three basis points at most. But there isn’t a whole lot trading, and I don’t really know if the weakness is spread throughout the curve. You could probably safely call it flat to a little weaker.”
The Treasury market showed losses Friday. The benchmark 10-year note finished with a yield of 3.82% after opening at 3.77%. The yield on the two-year finished at 1.08% after opening at 1.03%. The yield on the 30-year bond finished at 4.67% after opening at 4.64%.
The Municipal Market Data triple-A scale yielded 2.98% in 10 years and 3.82% in 20 years Friday, compared with Thursday’s levels of 2.97% and 3.81%. The scale yielded 4.11% in 30 years Friday, compared with 4.10% Thursday.
Friday’s triple-A muni scale in 10 years was at 78.8% of comparable Treasuries and 30-year munis were at 88.4%, according to MMD, while 30-year tax-exempt triple-A general obligation bonds were at 92.10% of the comparable London Interbank Offered Rate.
In a rare Friday new issuance, Bank of America Merrill Lynch priced $139.9 million of taxable school facilities construction bonds for the New Jersey EDA in two series, including $104.1 million of taxable BABs.
The BABs mature in 2035, yielding 6.425%, priced at par, or 4.18% after the 35% federal subsidy. The bonds were priced to yield 175 basis points over the comparable Treasury yield. The bonds are callable at par in 2020, and have a make-whole call at Treasuries plus 30 basis points prior to that.
Bonds from the $35.7 million taxable series mature in 2015, yielding 3.641% priced at par. The bonds were priced to yield 90 basis points over the comparable Treasury yield, and are not callable.
This deal follows the authority’s Thursday’s pricing of $723.2 million of tax-exempt school facilities construction bonds. Bank of America Merrill priced those bonds as well.
The credit is rated Aa3 by Moody’s Investors Service and AA-minus by Standard & Poor’s and Fitch Ratings.
According to economic data released Friday, durable goods orders unexpectedly declined 1.3% in March, the first drop in four months.
Excluding transportation goods, durable goods orders rose 2.8%, the largest monthly gain since December 2007.
Economists expected durable goods orders to increase 0.3% in March and for orders excluding transportation goods to increase 0.7%, according to the median estimate from Thomson Reuters.
New home sales soared 26.9% in March to a seasonally adjusted annual rate of 411,000, the largest monthly increase in 43 years, rebounding from a record low in February.
The March sales gain ended a four-month streak of new-home sales declines, which began in November. Sales in February were revised higher to 324,000, but it was still a record low for monthly new-home sales. January sales were also revised higher to 338,000.
Economists polled by Thomson Reuters expected 330,000 new-home sales for the month, according to the median estimate.