The municipal market was slightly weaker Thursday amid light to moderate secondary trading activity.
“There’s a bit of a weakness,” a trader in New York said. “We’re showing some losses, particularly on the long end. We’re down maybe two basis points or so.”
The Municipal Market Data triple-A 10-year scale rose three basis points Thursday to 2.99%, the 20-year increased two basis points to 4.28%, and the scale for 30-year bonds climbed five basis points to 4.75%.
In the daily MMD commentary, Randy Smolik wrote: “Whereas yesterday’s late-day fade in Treasuries caused most muni players to be on hold, today’s continued Treasury selling caused muni-customer selling to increase and dealers to turn more flexible on offerings.”
Smolik wrote that the selling pressure was evident from roughly six years and longer.
“One should note that primary issuance is showing some life for the coming week, which could have encouraged some of the selling today,” he wrote. “Some refunding deals are adding to the supply now that ratios to taxables and yields have plummeted over the past month.”
Thursday’s triple-A muni scale in 10 years was at 83.8% of comparable Treasuries and 30-year munis were at 102.6%, according to MMD. Meanwhile, 30-year tax-exempt triple-A general obligation bonds were at 107.5% of the comparable London Interbank Offered Rate.
The Treasury market was weaker Thursday. The benchmark 10-year note finished at 3.57% after opening at 3.46%. The 30-year bond finished at 4.63% after opening at 4.56%. Meanwhile, the two-year note finished at 0.78% after opening at 0.69%.
In the new-issue market Thursday, JPMorgan priced $231 million of state aid revenue notes for the Michigan Finance Authority, on behalf of Detroit Public Schools, in two series.
Notes from the $120 million Series A-1 mature in Feb. 2012 and yield 6.45% priced at par. Notes from the $111 million Series A-2 mature in March 2012 and yield 6.65% priced at par.
The credit is rated SP-1 by Standard & Poor’s.
RBC Capital Markets priced $132.2 million of student housing revenue bonds for the Illinois Finance Authority.
The bonds mature in 2020, 2021, 2024, 2031, and 2043. Yields range from 5.125% priced at par in 2020 to 7.00% with a 6.875% coupon in 2043.
The bonds, which are callable at par in 2021, are rated Baa3 by Moody’s Investors Service and BBB by Standard & Poor’s.
Nevada’s Clark County, School District competitively sold $98.6 million of limited-tax refunding GOs in two series.
Bonds from the $69.2 million Series A were sold to Citi with a true interest cost of 2.11%. The bonds mature from 2013 through 2016, yielding 1.75% with a 5% coupon in 2014 and 2.46% with a 5% coupon in 2016. Bonds maturing in 2013 and 2015 were not formally re-offered.
Bonds from the $29.4 million Series B were sold to JPMorgan with a TIC of 2.98%. The bonds mature in 2015, 2016, and 2019, yielding 2.30%, 2.55%, and 3.40%, respectively, all with 5% coupons.
The credit is rated Aa2 by Moody’s, AA by Standard & Poor’s, and AA-minus by Fitch Ratings.
Trades reported by the Municipal Securities Rulemaking Board showed some losses. A dealer sold to a customer insured Connecticut 5s of 2017 at 2.30%, two basis points higher than where they were sold Wednesday. Bonds from an interdealer trade of taxable California Build America Bond 7.3s of 2039 yielded 7.31%, three basis points higher than where they traded Wednesday.
A dealer sold to a customer taxable New York State BAB 6.646s of 2031 at 6.30%, three basis points higher than where they traded Wednesday. A dealer bought from a customer taxable New Jersey Transportation Trust Fund Authority BAB 6.1s of 2028 at 6.32%, two basis points higher than where they traded Wednesday.
In economic data released Thursday, initial jobless claims dropped 20,000 to 368,000 for the week ending Feb. 26, the lowest level since May 2008, while the four-week moving average fell below 400,000 for the first time since July 2008.
Continuing claims fell to 3.774 million for the week ending Feb. 19, the lowest level since October 2008.
Economists expected 395,000 initial claims and 3.800 million continuing claims, according to the median estimate from Thomson Reuters. Initial claims for the week ending Feb. 19 were revised to 388,000 from 391,000.
U.S. nonfarm productivity increased 2.6% in the fourth quarter of 2010, unrevised from the initial estimate, while output and hours worked were revised lower.
Unit labor costs, a ratio of hourly compensation to labor productivity, declined 0.6% for the quarter ending Dec. 31, also unrevised from last month’s initial estimate.
Workers’ output was revised lower to a 4.0% increase for the quarter, down from a 4.5% gain reported last month. Hours worked were also revised lower to a 1.4% increase for the quarter from 1.8% reported earlier.
Hourly compensation was revised slightly higher to a 2.0% increase from a 1.9% gain reported last month.
Economists expected the estimates from last month — a 2.6% increase in productivity and a 0.6% dip in unit labor — to hold, according to the median estimate from Thomson Reuters.
