The municipal market weakened Tuesday for the second consecutive day in light to moderate secondary trading, while traders braced for a heavy winter storm in the Northeast that may disrupt some market activity Wednesday.
“We’re probably weaker by two or three basis points,” a trader in San Francisco said. “The secondary is a bit sloppy, but business is getting done. Treasuries are off a little bit and we’re following suit for the most part.”
The Municipal Market Data triple-A 10-year scale increased two basis points Tuesday to 3.24%, the 20-year scale rose three basis points to 4.58%, and the scale for 30-year climbed four basis points to 4.83%.
“We’re starting off with a bit of weakness,” a trader in New York said. “We’re down maybe a basis point or two overall. There’s some decent activity, though.”
Tuesday’s triple-A muni scale in 10 years was at 97.0% of comparable Treasuries and 30-year munis were at 107.8%, according to MMD. Meanwhile, 30-year tax-exempt triple-A general obligation bonds were at 115.6% of the comparable London Interbank Offered Rate.
Treasuries showed some losses Tuesday. The benchmark 10-year note was quoted near the end of the session at 3.34% after opening at 3.28%. The 30-year bond finished at 4.49% after opening at 4.46%. The two-year note was quoted near the end of the session at 0.60% after opening at 0.57%.
The Treasury Department auctioned $32 billion of three-year notes with a 1% coupon at a 1.027% yield, a price of 99.92. The bid-to-cover ratio was 3.06. Federal Reserve banks also bought $701.3 million for their own account in exchange for maturing securities.
The Treasury also auctioned $25 billion of four-week bills at a 0.145% high yield, a price of 99.99. The coupon equivalent was 0.147%. The bid-to-cover ratio was 4.91. Fed banks bought $5.938 billion for their own accounts in exchange for maturing securities.
A snowstorm expected to hit the East Coast late Tuesday into Wednesday could disrupt a number of deals planned for pricing in Wednesday’s primary market.
Pricing of the New Jersey Economic Development Authority’s $1.9 billion school construction bond issue, which was planned for Wednesday, already has been postponed by at least one day in anticipation of the storm.
“The New York area forecast is for heavy snow, calling into question whether normal communications between banks and investors will be possible on Wednesday,” said Andrew Pratt, spokesman for New Jersey’s Treasury department. “The snow delay is designed to ensure that all potential buyers of New Jersey debt will have a chance to participate in the sale.”
Despite the postponement of the institutional order period, lead manager Bank of America Merrill Lynch completed its retail pricing on the deal Tuesday as planned.
Bonds from the $1.2 billion series of tax-exempt refunding debt mature from 2014 through 2024, with yields ranging from 2.30% with a 3% coupon in 2014 to 4.98% with a 5% coupon in 2024. These bonds are callable at par in 2021.
A $400 million series of SIFMA index refunding notes matures in 2016 and 2017, yielding 155 and 163 basis points over the index. They are callable at par in 2015 and 2016, respectively.
The deal also contains $245 million of taxable refunding bonds. Retail pricing information on the series was not available.
The credit is rated Aa3 by Moody’s Investors Service and AA-minus by Standard & Poor’s and Fitch Ratings.
The New York City Transitional Finance Authority continued its retail order period on $875 million of future tax-secured subordinate bonds. The deal is set to be priced by Barclays Capital on Wednesday, following a two-day retail order period that began Monday. The bonds are structured to mature serially from 2012 to 2031 and include two term bonds
In Tuesday’s retail order period, yields range from 1.17% with a 2.5% coupon in 2013 to 5.10% with a 5% coupon in 2034. Bonds maturing in 2012 will be decided via sealed bid.
Bonds maturing in 2024, 2025, from 2027 through 2030, and in 2039 were not offered during the retail order period. The bonds are callable at par in 2020.
The credit is rated Aa1 by Moody’s and AAA by Standard & Poor’s and Fitch.
Elsewhere in the new-issue market Tuesday, Morgan Stanley priced $124.5 million of certificates of participation for Upland, Calif.
The debt matures from 2012 through 2021, with term maturities in 2026, 2031, and 2041.
Yields range from 1.77% with a 3% coupon in 2012 to 6.50% with a 6.25% coupon in 2041.
The bonds, which are callable at par in 2021, are rated A3 by Moody’s and A by Standard & Poor’s.
Raymond James & Co. priced $42.8 million of revenue bonds for the Dormitory Authority of the State of New York.
The bonds mature from 2011 through 2022, with term bonds in 2025, 2030, and 2035.
Yields range from 1.12% with a 2% coupon in 2012 to 5.40% with 5.125% coupon in 2035.
Bonds maturing in 2011 were decided via sealed bid. The bonds, which are callable at par in 2020, are rated Aa3 by Moody’s.
In economic data released Tuesday, wholesale inventories unexpectedly declined 0.2% in November to post their first drop in 11 months, the Commerce Department reported Tuesday.
Wholesale sales increased 1.9% for the month. Economists expected gains of 1.0% for inventories and 1.5% for sales, according to the median estimate from Thomson Reuters.
October inventories rose 1.7%. October sales rose 2.6%.