Yields in the municipal market rose slightly yesterday, following the Treasury market, as New York City came to market with the week's largest scheduled transaction.
In the new-issue market, Citi priced $720 million of tax-exempt and taxable general obligation bonds for New York City yesterday in two series, upsized from an expected $520 million thanks to higher than anticipated institutional demand.
Bonds from the tax-exempt Series H-1 mature from 2011 through 2026, with yields ranging from 2.25% with a 3% coupon in 2011 to 5.35% with a 5.125% coupon in 2026. The bonds are callable at par in 2019. Bonds from the taxable $120 million Series H-2 mature in 2021. All bonds are insured by Assured Guaranty Corp. The underlying credit is rated Aa3 by Moody's Investors Service, AA by Standard & Poor's, and AA-minus by Fitch Ratings.
Meanwhile, in the secondary market, traders said tax-exempt yields were higher by two or three basis points.
"It's somewhat quiet, but a bit cheaper," a trader in New York said. "There's some trading going on with intermediate paper, some decent sized paper. But there's a bunch of bid-wanteds out there that people are hemorrhaging, and really, we're waiting on deals like the New York City GO deal to get some new paper in the market. We desperately need paper in the market to set levels cheaper and get retail going. We're a couple basis points cheaper today for the sole reason that people need to move paper."
Trades reported by the Municipal Securities Rulemaking Board yesterday showed losses. A dealer sold to a customer insured Chicago Board of Education 5s of 2027 at 5.09%, up one basis point from where they traded Tuesday. A dealer sold to a customer California 4.5s of 2030 at 5.56%, two basis points higher than where they were sold Tuesday. Bonds from an interdealer trade of Pennsylvania Economic Development Financing Authority 6.75s of 2036 at 8.81%, up three basis points from where they traded Tuesday.
"We're definitely down a couple of basis points, but it's quiet," a trader in Los Angeles said. "It's spread pretty evenly throughout the curve, but it's not more than three basis points off anywhere along the curve, and it's maybe even flat in some spots. But overall, I'd say two or three basis points weaker."
The Treasury market showed losses yesterday. The yield on the benchmark 10-year note, which opened at 2.75%, finished at 2.94%. The yield on the two-year note was quoted near the end of the session at 1.08% after opening at 0.93%. The yield on the 30-year bond, which opened at 3.50%, was quoted near the end of the session at 3.59%.
As of Tuesday's close, 10-year tax-exempt bonds were trading at 108.2% of comparable Treasuries, according to Municipal Market Data. Additionally, 30-year munis were trading at 136.6% of comparable Treasuries.
Elsewhere in the new-issue market yesterday, the Florida Department of Management Services competitively sold $130.8 million of certificates of participation to Barclays Capital with a true interest cost of 5.01%. The bonds mature from 2010 through 2028, with yields ranging from 2.00% with a 4% coupon in 2010 to 5.41% with a 5.25% coupon in 2027. Bonds maturing in 2028 were not formally re-offered. The bonds are callable at 101 in 2018, declining to par in 2019. The credit is rated Aa2 by Moody's, AA-plus by Standard & Poor's, and AA by Fitch.
Banc of America Securities LLC priced $60.7 million of GO refunding and improvement bonds for Missouri's Parkway C-2 School District. The bonds mature from 2010 through 2023, with term bonds in 2024 and 2025. Yields range from 1.25% with a 2.125% coupon in 2011 to 4.40% with a 4.625% coupon in 2025. Bonds maturing in 2010 were not formally re-offered. The bonds, which are callable at par in 2019, are rated triple-A by Standard & Poor's.
JPMorgan priced $50 million of GO bonds for Texas. The bonds mature from 2009 through 2019, with term bonds in 2033. Yields range from 0.70% with a 2% coupon in 2009 to 4.48% with a 4.375% coupon in 2023. The bonds, which are callable at par in 2019, are rated AA by Standard & Poor's and AA-plus by Fitch.
Barclays Capital priced $42.9 million of general revenue and refunding bonds for Idaho's Boise State University. The bonds mature from 2010 through 2026, with term bonds in 2029, 2034, and 2039. Yields range from 1.17% with a 5% coupon in 2010 to 5.25% with a 5% coupon in 2039. The bonds, which are callable at par in 2019, are rated A1 by Moody's and A-plus by Standard & Poor's.
Banc of America priced $30 million of current interest and capital appreciation bonds for California's Evergreen Elementary School District. Bonds from the $6.6 million series of current interest bonds mature in 2033, yielding 5.28% with a 5.125% coupon. These bonds are callable at par in 2019. The deal also contained a $23.4 million series of capital appreciation bonds, which mature in 2012 and from 2018 through 2031. All bonds are insured by Assured Guaranty. The underlying credit is rated Aa3 by Moody's and AA by Standard & Poor's.
New Jersey's Borough of Kenilworth Board of Education competitively sold $13.9 million of school bonds to Morgan Keegan & Co. with a net interest cost of 4.20%. The bonds mature from 2010 through 2029, with coupons ranging from 2% in 2010 to 4.625% in 2029. None of the bonds were formally re-offered. The bonds, which are callable at par in 2019, are rated AA by Standard & Poor's.
In economic data released yesterday, existing home sales decreased 5.3% in January to a seasonally adjusted 4.49 million-unit rate. The sales drop to 4.49 million, contrasted a rise to a 4.80 million unit pace predicted by Thomson Reuters' poll of economists and followed an unrevised 6.5% gain to a 4.74 million unit level in December.