By Michael Scarchilli | MARKET POST | Bond Buyer
Monday, February 2, 2009 — NEW YORK — The municipal market was slightly firmer today. Traders said tax-exempt yields were lower by about two or three basis points overall.
“We’re starting the week off a little better here,” a trader in New York said. “There isn’t a ton of activity out there right now, but there’s definitely a firmer tone, and we’re seeing some gains. I’d say we’re better by two or three basis points overall, maybe one basis point on the short end.”
The Treasury market showed gains today. The yield on the benchmark 10-year Treasury note, which opened at 2.85%, was recently quoted at 2.74%. The yield on the two-year note was quoted recently at 0.91%, after opening at 0.94%. And the yield on the 30-year bond, which opened at 3.60%, was quoted recently at 3.50%.
After a lull in supply during the last two weeks, the first week of February will kick off with noticeably more vigor thanks to at least two significantly sized deals - a $950 million California school deal and a $614 million Georgia general obligation sale.
The offerings are part of an estimated $3.86 billion in total new-issue volume expected in the competitive and negotiated markets this week, compared with a revised $3.38 billion last week, according to Thomson Reuters.
Tomorrow, retail investors will get first crack at the week's largest deal - $950 million of GOs from the Los Angeles Unified School District - ahead of Wednesday's institutional pricing by Barclays Capital.
The deal is structured to mature serially from 2010 to 2024 with term bonds expected in 2029 and 2034, and is rated Aa3 by Moody's Investors Service and AA-minus by Standard & Poor's.
The LAUSD issue is among the five out of six largest deals whose issuers are using retail order periods to capitalize on the strength of retail demand in recent months. [emphasis added]
In the new-issue market today, RBC Capital Markets priced $171.3 million of refunding and improvement bonds for the Texas Tech University System Board of Regents. The bonds mature from 2009 through 2028, with term bonds in 2033 and 2038. Yields range from 1.60% with a 4% coupon in 2011 to 5.41% with a 5.25% coupon in 2038. Bonds maturing in 2009 and 2010 will be decided via sealed bid. The bonds, which are callable at par in 2019, are rated Aa3 by Moody’s and AA by both Standard & Poor’s and Fitch Ratings.
In economic data released today, personal income fell 0.2% in December, after a revised 0.4% drop the previous month. Economists polled by Thomson Reuters had predicted a 0.4% decline.
Personal consumption dipped 1.0% in December, after a 0.8% drop the previous month. Economists polled by Thomson Reuters had predicted a 0.9% decrease.
The core personal consumption expenditures deflator showed no change in December, after no change the previous month. Economists polled by Thomson Reuters predicted no change.
Spending on construction projects fell 1.4% to a seasonally adjusted annual rate of $1.054 trillion in December as private construction decreased 1.7%, and public construction slid 0.8%. The overall decrease, which was larger than the 1.2% decrease projected by Thomson Reuters, followed a revised November level of $1.069 trillion, a 1.2% decline from the prior month.
Also, the overall economy failed to grow for the fourth straight month after 83 months of expansion, while the manufacturing sector was contracted for the twelfth month in a row, according to the Institute for Supply Management’s monthly report on business. The ISM index gained to 35.6 in January from 32.9 in December. Economists polled by Thomson Reuters predicted the index would rise to 32.6.
The Bond Buyer’s 30-day visible supply rose $128.8 million to $10.906 billion. The total is comprised of $1.360 billion of competitive deals and $9.546 billion of negotiated bonds.
Previous Session's Activity
The Municipal Securities Rulemaking Board reported 41,268 trades of 13,290 separate issues for volume of $12.51 billion yesterday. Most active was insured North Carolina Medical Care Commission 5.625s of 2029, which traded 1,141 times at a high of 102.375 and a low of 98.500.