The Bond Buyer's weekly yield indexes were narrowly mixed this week, as the municipal market strung together several slightly firmer sessions amid the primary market pricing of a number of sizeable new issues.
At the forefront was Tuesday's pricing of $883 million of general obligation bonds for New York City by senior manager Morgan Stanley. The deal was originally slated at $483 million, but was upsized last Friday by $100 million and Tuesday by another $300 million due to investor demand, mostly from the retail sector. The city received $546 million of retail orders and filled $454 million of those.
Michael Pietronico, chief executive officer at Miller Tabak Asset Management, said that the city benefitted from the momentum from the California GO deal that came to market two weeks ago. The state increased their planned $4 billion GO sale to $6.5 billion due to higher-than-anticipated demand.
"I think the psychology of the market changed with the large California general obligation deal that came," Pietronico said. "The fact that it was a weakening credit that was able to have such great reception that they were able to upsize the deal. It really spoke volumes about the retail sponsorship of the municipal market, and how it's been quite consistent.
"Quite frankly," he continued, "an issuer would have to be crazy to come competitively these days, because the negotiated way of coming to the market allows the retail investor multiple days to work with their advisor to put orders in. And as you can see, by the Cal GO deal and certainly the New York City deal, that over time, the reception is greater because the biggest buyer in the market right now needs time to do due diligence on a credit and decided whether they want to buy. So the whole competitive model is coming into question."
Against that backdrop, The Bond Buyer 20-bond index of 20-year general obligation bond yields was unchanged this week at 4.92%.
The 11-bond GO index of higher-grade 20-year GO yields also was unchanged this week at 4.68%.
The revenue bond index, which measures 30-year revenue bond yields, declined one basis point this week to 5.74%, which is the lowest that the index has been since Feb. 19, when it was 5.70%.
At the same time, the 10-year Treasury note yield rose 10 basis points this week to 2.85%, which is the highest it has been since March 12, when it was 2.88%.
The 30-year. Treasury bond yield also rose 10 basis points this week, to 3.67%, which is the highest yield for the bond since Feb. 19, when it was 3.68%.
The Bond Buyer's one-year note index, which measures one-year tax-exempt yields, rose five basis points this week to 0.70%, after reaching an all-time low of 0.65% last week. This week's yield is the second-lowest for the index since it began on July 12, 1989.
The weekly average yield to maturity on The Bond Buyer 40-bond municipal bond index finished at 5.55%, down 0.02 basis points from last week's 5.57%.
