The municipal market was slightly weaker Tuesday amid light to moderate secondary trading activity.
“There’s some pressure out on the long end,” a trader in New York said. “We’re probably down two or three basis points right now.”
Traders said rising taxable yields continue to put pressure on tax-exempt yields, though the weakness has been muted by a light new-issue calendar and continued relative-value interest from crossover buyers.
“We’d probably be weakening more in sympathy if we had more supply weighing us down,” a trader in Los Angeles said.
The Municipal Market Data triple-A 10-year scale climbed one basis point Tuesday to 3.39%, the 20-year scale rose one basis point to 4.62%, and the scale for 30-year bonds increased three basis points to 4.95%.
“Thin market conditions kept muni adjustments very modest,” Randy Smolik wrote in the daily MMD commentary. “But as ratios continued to fall, one does have to question the market’s depth, and will conviction hold up once the bid is tested with supply?”
Tuesday’s triple-A muni scale in 10 years was at 91.1% of comparable Treasuries and 30-year munis were at 104.2%, according to MMD. Meanwhile, 30-year tax-exempt triple-A general obligation bonds were at 109.5% 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 3.73% after opening at 3.63%. The 30-year bond was quoted near the end of the session at 4.76% after opening at 4.69%. The two-year note was quoted near the end of the session at 0.85% after opening at 0.76%.
The Treasury Department auctioned $32 billion of three-year notes with a 1.25% coupon at a 1.349% yield, a price of 99.71. The bid-to-cover ratio was 3.01. Federal Reserve banks also bought $734.2 million for their own account in exchange for maturing securities.
In Tuesday’s new-issue market, Siebert Brandford Shank & Co. priced $170 million of GO bonds for Ohio in two series.
Bonds from the $120 million series mature from 2013 through 2030, with yields ranging from 1.18% with a 5% coupon in 2013 to 5.04% with a 5% coupon in 2030. The bonds are callable at par in 2020, except those maturing in 2021, which are not callable.
Bonds from the $50 million series mature from 2013 through 2025, with yields ranging from 1.18% with a 3% coupon in 2013 to 4.55% with a 5% coupon in 2025. The bonds are callable at par in 2020, except those maturing in 2021, which are not callable.
The credit is rated Aa1 by Moody’s Investors Service and AA-plus by Standard & Poor’s and Fitch Ratings.
Morgan Stanley priced $150 million of bonds for the Pennsylvania Higher Educational Finance Authority on behalf of the University of Pennsylvania.
The bonds mature in 2016, 2018, and from 2020 through 2031, with a term bond in 2041. Yields range from 2.24% with a 4.5% coupon in 2016 to 5.18% with a 5% coupon in 2041. The bonds are callable at par in 2021, except bonds maturing in 2021, which are not callable.
The credit is rated Aa2 by Moody’s and AA-plus by Standard & Poor’s.
Wells Fargo Securities priced $149.3 million of first-tier revenue refunding put bonds for the Texas Transportation Commission.
The bonds mature in 2042 yielding 2.75% priced at par.
The credit is rated Baa1 by Moody’s and BBB-plus by Standard & Poor’s and Fitch.
JPMorgan priced for retail investors $216.4 million of sales tax revenue bonds for California’s San Joaquin County Transportation Authority.
The bonds mature from 2016 through 2031, with term bonds in 2036 and 2041. Yields range from 2.42% with a 3% coupon in 2016 to 5.46% with a 5.375% coupon in 2031.
Bonds maturing from 2027 through 2030, and in 2036 and 2041 were not offered during the retail order period.
The bonds, which are callable at par in 2021, are rated Aa3 by Moody’s and AA by Standard & Poor’s.
Wells Fargo priced for retail investors $110 million of GO public improvement refunding bonds for Puerto Rico.
The bonds mature in 2024, 2025, 2028, and contain a split maturity in 2033. Yields ranging from 5.50% with a 5.25% coupon in 2024 to 6.25% with a 6.125% coupon in 2033. The bonds are callable at par in 2021, except those maturing in 2033, which are callable at par in 2016.
Bonds maturing in 2024 and 2025 and portions of bonds maturing in 2033 are insured by Assured Guaranty Municipal Corp.
The remaining bonds were uninsured. The underlying credit is rated A3 by Moody’s, BBB-minus by Standard & Poor’s, and BBB-plus by Fitch.
In the competitive market, the Minnesota State Colleges and Universities Board of Trustees sold $82.4 million of revenue fund bonds to Robert W. Baird & Co., with a true interest cost of 4.26%.
The bonds mature from 2012 through 2031, with coupons ranging from 3% in 2012 to 5% in 2031. None of the bonds were formally re-offered.
The bonds, which are callable at par in 2021, are rated Aa2 by Moody’s and AA-minus by Standard & Poor’s.
Mercer County, N.J., competitively sold $37.3 million of bond anticipation notes to TD Securities with a net interest cost of 0.51%.
The Bans mature in February 2012 with a 1.5% coupon and were not formally re-offered.
Trades reported by the Municipal Securities Rulemaking Board Tuesday showed some losses.
A dealer sold to a customer taxable New York State Build America Bond 5.985s of 2036 at 6.14%, two basis points higher than where they were sold Monday. A dealer sold to a customer New Jersey Economic Development Authority 5s of 2023 at 5.20%, even with where they were sold Monday.
A dealer bought from a customer taxable Puerto Rico Sales Tax Financing Authority BAB 5.75s of 2042 at 6.20%, two basis points higher than where they were sold Monday. A dealer sold to a customer Texas’ Lone Star College System 5s of 2029 at 4.56%, three basis points higher than where they were sold Monday.
The economic calendar was light Tuesday.