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Market Post: Traders Look To Primary For Leadership

20.05.12

NEW YORK – The tax-exempt sell will look for leadership in the primary market Tuesday as munis search for captaincy. On Tuesday morning, trading activity picked up in the long end of the curve as yields jumped a few constituent points.

“It’s a slow start to a Tuesday and most of the activity we saw was in the back end of the curve,” said a merchant in Florida. “All the trades this morning suggest one to two basis points weaker. It’s a toy steeper in the curve driven by the back end.”

The trader added that in the front end, the market is being choosy. “There are not a lot of trades within 10-years.” The belly of the curve has been still.

“There are a couple deals being priced that the market place is looking at,” the seller said. “That will give us more clarity. We were definitely not falling in line with Treasuries yesterday and we had a unemotional time creating enough supply to keep up.”

Tax-exempt yields were rising on the dream of end of the curve, according to the Municipal Market Data scale. Yields contents 18-years were steady, while yields beyond 2030 rose up to two basis points.

On Monday, the two-year return closed at 0.42% for its fifth consecutive trading session. The 10- and 30-year generate closed down one point each to 2.29% and 3.70%, respectively.

In Tuesday morning trading, Resources yields moved slightly higher as investors felt confident enough to move into more precarious assets. The two-year Treasury yield moved up one basis point to 0.25%. The 10-year Funds yield was up two basis points to 2.04% and the 30-year yield moved up three foundation points to 3.09%.

The primary market today will see an influx of deals, as the holiday-shortened week pushes most issuers to get about to market in the earlier part of the week.

In the negotiated market, Morgan Stanley is expected to cost $417.5 million of student loan revenue bonds in two series for Iowa Student Loan Liquidity Corp.

BMO Capital Markets is expected to evaluate $214.84 million of Chicago general obligation bonds. The $200 million taxable series were priced Monday – a day in the lead of schedule.

Bank of America Merrill Lynch is also expected to price $333.7 million of Massachusetts Drinking-water Resources Authority general revenue refunding bonds.

On the competitive chronology, Florida will auction $159 million of public education capital expenditure refunding bonds, rated Aa1 by Moody’s Investors Service and AAA by Pattern & Poor’s and Fitch Ratings.

Clark County, Nev., will sell $124.06 million in net income bonds, rated Aa3 by Moody’s and AA-minus by Standard & Poor’s.

Munis are budget-priced and getting cheaper as muni-to-Treasury ratios are increasing, according to MMD analyst Daniel Berger. Ratios “are high-pitched and will get higher as more debt is issued this quarter,” he noted.

The five-year muni-to-Exchequer ratio closed yesterday at 136.8%, and the 10-year ratio closed at 114.5%. The 30-year proportion is 121.7%. Ratios have not approached these high levels since early 2009.

Source: Bond Buyer

Longest Debt Beating Stocks Buoys World Trade Sale: Muni Credit

20.05.12

Nov. 2 (Bloomberg) -- The longest-while tax-free bonds, which are beating stocks and the rest of the $2.9 trillion civil market, helped lower yields on World Trade Center in the red due in as much as 40 years in the busiest week of 2011 for state and local borrowing.

As 30-year U.S. Moneys bonds rallied the most since 2009, debt maturing in 2051 that was issued to hands finance rebuilding of New York’s World Trade Center was priced yesterday to agree 5.05 percent, 0.05 percentage point lower than preliminary indications.

Tax-set free securities due in more than 22 years have returned 12.1 percent in 2011, beating all other maturities, according to Barclays Funds data, and driving long-term tax-exempt yields to the lowest since the 1960s. The Federal Accessible’s plan to cut lending rates by buying longer-term Treasuries, low inflation and desirable from insurance companies and other investors with extended liabilities helped drive the gains.

“This is a skilled time to issue long-term debt,” said Alan Schankel, captain of fixed-income research for Janney Montgomery Scott LLC in Philadelphia. “You get dumfound bottom interest rates and you lock them in.”

Municipal bonds are beating Treasuries in reckon return for the year by 8.4 percent to 8 percent, Bank of America Merrill Lynch observations show. They’re outpacing the 7.5 percent return on corporate debt and the 1.56 percent obtain of the Standard & Poor’s GSCI Spot Index of commodities prices. The S&P 500 pedigree index has dropped 3.1 percent in the period.

Failed Prediction

Grandeur and local bonds’ outperformance contrasts with the Dec. 19 prediction of bank analyst Meredith Whitney on the “60 Minutes” idiot box show of “hundreds of billions of dollars” of defaults this year. In place of, defaults fell to $1.1 billion, a quarter of 2010’s class, according to Bank of America.

Thirty-year U.S. Treasury bonds rallied the most on Oct. 31 since Parade 2009 on renewed concern that Europe’s attempt to avert a Greek straitened default may falter. The yield fell to as low as 2.94 percent yesterday, the least since Oct. 7.

The tax-exempt 30-year concur fell to 3.59 percent yesterday, near a one-month low. It’s been higher than the tantamount Treasury yield in all by two weeks of the past year, according to data compiled by Bloomberg, making big-term municipals attractive to buyers of government debt.

“In the circumstances of low rates, yield-hungry investors are increasingly looking at the long end,” George Friedlander, a urban-bond strategist at Citigroup Inc., said in report this week.

Demand for the $1.2 billion Fraternity Trade Center issue, the largest of the week, outpaced supply by as much as 8-to-1, said Kathy Bramlage, a pilot in New York at Hightower Advisors’ Treasury Partners unit, which manages $7 billion.

Match Yield

An investor in the top 35 percent income-tax bracket would have to earn a 7.77 percent taxable bring in to match the 5.05 percent offered on the 2051 tax-free Trade Center shackles.

The debt is being issued through the New York Liberty Development Corp., created to convinced tax-exempt debt under the Liberty Bond Program, part of a federal economic combination to help New York City recover from the Sept. 11 terrorist attacks.

The outcome will help pay for 4 World Trade Center, a 64- floor building that will be the headquarters of the Haven Authority of New York and New Jersey. It’s secured by payments from the Port Arbiter government and New York City, which is leasing 15 floors in the tower.

The sale is the first where the transportation mechanism and the city have combined to back bonds, said Marvin Markus, an investment banker for Goldman Sachs Gathering Inc., which marketed the debt.

More Risk

The bonds are rated A+, S&P’s fifth-highest state, providing added yield but more risk than similar general- obligation liable, said John Hallacy, head of municipal research at Bank of America Merrill Lynch.

“There’s an hunger for yield and this is a solid investment-grade deal,” he said. “It’s the higher echelon of return, not the real junk.”

States and local governments have about $9.67 billion of sales planned this week, the most since December, Bloomberg observations show. Following are descriptions of coming issues:

IOWA STUDENT LOAN LIQUIDITY CORP., which manages $3.5 billion of loans to 220,000 students, will suggest $432 million of revenue bonds as soon as this week to refund whilom issues and finance a reserve fund. Morgan Stanley will lead the act on. Standard & Poor’s rates the debt A, its sixth-highest station. (Added Nov. 2)

MINNESOTA plans to sell $788 million of tobacco-working-out bonds as soon as the week of Nov. 14. A portion of the proceeds from the state’s first tobacco-link deal will help balance its two-year budget. The transaction includes $81 million of taxable beholden maturing in 2014 and 2015. Another $706.5 million of tax- exempt bonds will polish annually from 2016 through 2026, with $285.2 million due in 2031. Fitch Ratings is expected to status the sale BBB+, its third-lowest investment grade, according to the preliminary official affirmation. Standard & Poor’s is expected to rate bonds maturing in 2014 through 2022 A, its sixth-highest slope, and debt maturing in 2023 and thereafter one level lower at A-. (Added Nov. 1)

PHILADELPHIA plans to proffer $187 million of water and sewer revenue bonds as soon as next week for prime improvements to a system that serves more than 2 million people, according to a preliminary official report. Refunding will account for $52 million of the sale, led by Ramirez & Co. Moody’s rates the bonds A1, its fifth-highest decline. (Added Nov. 1)

ALASKA HOUSING FINANCE CORP., which bought 1,133 where it hurts loans in fiscal 2010, plans to offer $229 million of mortgage-interest bonds as soon as this week, according to a preliminary official statement. A $29 million piece of the sale is federally taxable. Morgan Keegan will lead the sale. Fitch gives the bonds its top AAA rating. (Added Nov. 1)

--With help from Andrea Riquier in New York. Editors: Jerry Hart, Mark Schoifet

To connection the reporters on this story: Michelle Kaske in New York at mkaske@bloomberg.net Martin Z. Braun in New York at mbraun6@bloomberg.net.

To friend the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net.

Source: BusinessWeek