The municipal market was slightly weaker yesterday as issuers in New York and Massachusetts came to market with more than $1 billion of taxable Build America Bonds.
“It’s fairly quiet, but people do want to try and move bonds,” a trader in New York said. “It’s feeling like we’re at least two or three basis points cheaper right now though.”
“We’re definitely feeling a little bit weaker,” a trader in Los Angeles said. “It could be as much as three or four basis points cheaper in spots, but we’re probably down a solid two, maybe three, overall.”
In the new-issue market yesterday, JPMorgan priced $560.5 million of BABs for New York City.
The bonds mature from 2017 through 2022, with term bonds in 2024, 2027, 2029, 2035, and 2036. Yields range from 4.549% in 2017, or 2.96% after the 35% federal subsidy, to 5.985% in 2036, or 3.89% after the subsidy, all priced at par.
The bonds were priced to yield between 105 and 195 basis points over the comparable Treasury yield.
The bonds contain a make-whole call at Treasuries plus 25 basis points for bonds maturing from 2019 through 2022, and in 2027 and 2036, and at Treasuries plus 30 basis points in 2024, 2029, and 2035. Bonds maturing in 2029 and 2035 are also callable at par in 2019.
New York City also competitively sold $87.3 million of taxable debt yesterday to Morgan Keegan & Co., with a true interest cost of 3.06%.
The bonds mature from 2011 through 2016, with yields ranging from 1.28% with a 2% coupon in 2011 to 3.84% with a 4% coupon in 2016.
The bonds are rated Aa3 by Moody’s Investors Service, AA by Standard & Poor’s, and AA-minus by Fitch Ratings.
Ramirez & Co. priced $600 million of debt for the Massachusetts School Building Authority, including $450 million of taxable BABs.
The BABs mature in 2039, yielding 5.715%, or 3.71% after the 35% federal subsidy. The bonds were priced to yield 125 basis points over the comparable Treasury yield. These bonds are not callable.
Ramirez & Co. also priced $150 million of dedicated sales tax bonds for the MSBA. The bonds mature from 2010 through 2019, with yields ranging from 0.63% with a 4% coupon in 2011 to 2.96% with a 5% coupon in 2019.
Bonds maturing in 2010 were decided via sealed bid. These bonds are not callable.
The credit is rated Aa2 by Moody’s, AA-plus by Standard & Poor’s, and AA by Fitch.
Also, JPMorgan priced $400 million of senior lien revenue bonds for the Texas Private Activity Bond Surface Transportation Corp. The bonds mature in 2031 and 2039, yielding 6.90% with a 7.5% coupon and 7.125% with a 7% coupon, respectively.
The bonds, which are callable at par in 2019, are rated Baa2 by Moody’s and BBB-minus by Fitch.
The Treasury market also showed some losses yesterday. The yield on the benchmark 10-year note opened at 3.43% and was quoted near the end of the session at 3.49%.
The yield on the two-year note opened at 0.74% and finished at 0.76%. The yield on the 30-year bond finished at 4.49% after opening at 4.42%.
Yesterday’s Municipal Market Data triple-A scale yielded 2.82% in 10 years and 3.61% in 20 years, after levels of 2.79% and 3.60% on Wednesday. The scale yielded 4.11% in 30 years yesterday, after Wednesday’s level of 4.07%.
As of Wednesday’s close, the triple-A muni scale in 10 years was at 82.5% of comparable Treasuries, while 30-year munis were 93.1% of comparable Treasuries, according to MMD, while 30-year tax-exempt triple-A general obligation bonds were at 96.2% of the comparable London Interbank Offered Rate.
Elsewhere in the new-issue market, Illinois competitively sold $155 million of sales tax revenue bonds to Bank of America Merrill Lynch with a TIC of 4.32%.
The bonds mature from 2011 through 2029, with a term bond in 2034, and yield 3.91% with a 4% coupon in 2021, 4.29% with a 4.25% coupon in 2025, and 4.45% with a 5% coupon in 2027. The remainder of the bonds were sold but not available.
The bonds, which are callable at par in 2019, are rated A2 by Moody’s, AAA by Standard & Poor’s, and AA by Fitch.
Morgan Stanley priced $130 million of revenue bonds for the New Hampshire Business Finance Authority.
The bonds mature from 2013 through 2019, with term bonds in 2027 and 2039. Yields range from 3.65% with a 4% coupon in 2013 to 6.28% with a 6.125% coupon in 2039.
The bonds, which are callable at par in 2019, are rated Baa1 by Moody’s and BBB-plus by Standard & Poor’s.
In economic data released yesterday, initial jobless claims rose 17,000 to 474,000 for the week ending Dec. 5, the first uptick after five straight weeks of declines.
But continuing claims fell about 303,000 to 5.157 million for the week ending Nov. 28, from the previous week’s revised level of 5.460 million. It was the largest drop for continuing claims since the week ending July 4, when it fell 591,000 to 6.313 million.
Economists had predicted a 460,000 initial claims level the week of Dec. 5 and 5.44 million in continuing claims for the week of Nov. 28, according to median estimates from Thomson Reuters.