The municipal market was flat to slightly firmer Thursday amid light to moderate secondary trading activity, as 10-year munis continued to dip to historically low levels, reaching the fourth record low in the past week.
“You have to go out maybe five years or so to see some gains, but past that five or so year point, you’re talking about two or three basis points’ improvement,” a trader in New York said.
“Inside of that, on the very short end, we’re probably just flat,” the trader said. “But the tone is yet again firmer, and we’re probably going to pick up another two or three basis points on the scale when all is said and done.”
The Municipal Market Data triple-A scale yielded a record-low 2.43% in 10 years and 3.53% in 20 years Thursday, following levels of 2.46% and 3.55% on Wednesday. The scale yielded 3.87% in 30 years Thursday, following 3.88% on Wednesday.
“You wonder what’s going to stop the rally at this point,” a trader in San Francisco said. “I’m not really seeing any evidence that we’re approaching the end. It’s another couple basis points today, and there are no real signs of a slowdown.”
Thursday’s triple-A muni scale in 10 years was at 88.7% of comparable Treasuries and 30-year munis were at 98.2%, according to MMD, while 30-year tax-exempt triple-A general obligation bonds were at 109.0% of the comparable London Interbank Offered Rate.
The Treasury market showed some losses Thursday. The benchmark 10-year note was quoted near the end of the session at 2.72% after opening at 2.71%. The 30-year bond was quoted near the end of the session at 3.93% after opening at 3.92%. The two-year note was quoted near the end of the session at 0.55% after opening at 0.52%.
In the new-issue market Thursday, Bank of America Merrill Lynch priced $79.6 million of revenue bonds for the Massachusetts Health and Educational Facilities Authority.
The bonds mature from 2011 through 2020, with term bonds in 2025, 2030, and 2038. Yields range from 2.06% with a 5% coupon in 2011 to 5.45% with a 5.25% coupon in 2038.
The bonds, which are callable at par in 2020, are rated BBB-plus by both Standard & Poor’s and Fitch Ratings.
Morgan Keegan & Co. priced $72.8 million of taxable school building Build America Bonds for Texas’ Harlingen Independent School District.
The bonds mature from 2011 through 2030, with term bonds in 2035 and 2040. Yields range from 0.40% in 2011, or 0.26% after the 35% federal subsidy, to 5.47% in 2040, or 3.56% after the subsidy.
The bonds, which are callable at par in 2020, were priced to yield between 40 and 185 basis points over the comparable Treasury yields, and are backed by the Permanent School Fund guarantee program. The underlying credit is rated Aa3 by Moody’s Investors Service and AA-minus by Standard & Poor’s.
In the competitive market, Hamden, Conn., competitively sold $51.7 million of GO bond anticipation notes to Wells Fargo Securities.
The Bans mature in Aug. 2011 with a 2% coupon. The Bans were not formally re-offered and are not callable.
JPMorgan priced $50 million of revenue bonds for the Dormitory Authority of the State of New York.
The bonds mature in 2041, yielding 4.05% with a 5% coupon.
The bonds, which are callable at par in 2020, are rated Aa1 by Moody’s and AAA by Standard & Poor’s.
Boulder County, Colo., competitively sold $26.5 million of open-space capital improvement trust fund bonds to Fidelity Capital Markets with a true interest cost of 1.71%.
The bonds mature from 2011 through 2019, with coupons ranging from 2% in 2011 to 4% in 2019. None of the bonds were formally re-offered.
The bonds, which are not callable, are rated AA by Standard & Poor’s.
Florida’s Osceola County competitively sold $25 million of limited-tax GO bonds to Citi with a TIC of 2.86%.
The bonds mature from 2011 through 2025, with yields ranging from 2.31% with a 3% coupon in 2018 to 3.50% priced at par in 2025. Bonds maturing from 2011 through 2017 were not formally re-offered.
The bonds, which are callable at par in 2020, are rated Aa3 by Moody’s and AAA by Standard & Poor’s.
New York’s Hauppauge Union Free School District competitively sold $25 million of tax anticipation notes to TD Securities, with a net interest cost of 0.34%.
The Tans mature in June 2011 with a 2% coupon and were not formally re-offered.
In economic data released Thursday, initial jobless claims increased by 2,000 to 484,000 for the week ending Aug. 7, a level above economists’ estimates and the highest total since February.
Continuing claims decreased by 118,000 to 4.452 million, the lowest level since June 26.
Economists expected 465,000 initial claims and 4.540 million continuing claims, according to the median estimate from Thomson Reuters.
Import prices rose 0.2% in July, the first increase in three months, on higher fuel costs. Export prices declined 0.2% in July.
Import prices excluding fuel fell 0.3% in July and slid 0.5% in June. This was the first back-to-back decline in non-fuel import prices since February and March 2009. The June decline was the first in 11 months. Import prices excluding petroleum declined 0.2% in July.
Economists expected import prices to increase 0.4%, according to the median estimate from Thomson Reuters.