NEW YORK – As Treasuries pushed higher this morning in a technical reversal, the municipal secondary firmed, while in the primary the Florida Department of Management Services sold $117 million of certificates of participation.
Tax-exempts lagged Treasuries, with traders reporting municipal yields were lower by three basis points, while the 10-year Treasury plunged eight basis points to 4.70%.
As is typical in a rally, particularly in an uncertain market, the bid side lagged the offered.
“Those who were the offered side have quickly firmed things up, and a few of the more attractive offerings are still seeing a bid,” a trader in New York said. “Everyone has been burned [chasing bids] so the bid side is more reluctant. But there’s still a relative shortage of new issue supply so if you want to have some line items you’ve got to buy bonds.”
Another trader in New York said investors may use this up-trade to move underwater positions.
“We’ve gotten to a bit of an oversold position I think. Trying to get leadership is very difficult and trying to get the ultimate buyer to believe in anything is also pretty tough,” he said. “It’s just an inch at a time. I think a lot of people are still sitting on positions they’re not too terribly happy with, so we’ve got to have the great cleansing before we can do anything too meaningful.”
Treasuries opened in the black and pushed higher throughout the morning, as economic data did not stray far from expectations.
Business inventories climbed 0.4% in January, as sales ticked up 1.3%, according to the Commerce Department. IFR Markets had projected that January inventories would rise 0.3%.
Earlier, the Commerce Department reported sales by U.S. retailers decreased 1.3% in February after rising a revised 2.9% in January. In data that excludes input from auto dealerships, sales slid 0.4%, after rising a revised 2.6% in January. IFR Markets’ poll of economists had predicted a 0.7% decrease for overall sales and a 0.4% decrease in sales that excluded autos.
The market showed little reaction to a separate report that showed the U.S. trade deficit widened to record levels on a current account basis for the fourth quarter. The preliminary 2005 fourth quarter current account deficit increased to $224.9 billion – representing 7.0% of GDP, Commerce reported this morning. For all of 2005, the current-account deficits increased, as expected, to a record $804.9 billion from $668.1 billion in 2004. The deficit represented 6.4% of GDP – compared to 5.7% in 2005.
In the tax-exempt primary, the Florida Department of Management Services sold $117 million of certificates of participation. UBS Securities LLC bought the deal and reoffered bonds to yield from 3.50% in 2008 to 4.25% in 2021. Term bonds of 2025 had a 4.375% coupon and were offered at 98.5. UBS did not reoffer bonds of 2006, 2007, 2017, 2018 and 2023. Bonds are callable at 101 in 2015, declining to par in 2016. Moody’s Investors Service rates the credit Aa2, Standard & Poor’s assigns a AA-plus and Fitch Ratings pegs it AA-minus.
Puerto Rico Convention Center District was in the market with $470 million of debt. Lehman Brothers tentatively priced the hotel occupancy tax revenue bonds to yield from 3.65% in 2007 to 4.37% in 2027. Term maturities were priced as 5s of 2031 to yield 4.38% and at par to yield 4 ½% in 2036. CIFG and Ambac Assurance Corp. insured several maturities, and the deal has underlying ratings of Baa2 from Moody’s and BBB-plus from Standard & Poor’s. There is a par call in 2016.
A.G. Edwards & Sons Inc. was in the market with $205 million of Arizona Water Infrastructure Finance Authority water quality revenue bonds but did not release pricing details. The bonds will mature from 2007 to 2026.
J.P. Morgan Securities Inc. began taking retail orders on $650 million of Chicago general obligation bonds ahead of institutional pricing tomorrow. For retail, a $582 million tax-exempt series was priced to yield from 3.52% in 2008 to 4.44% in 2029. Bonds of 2027, 2036 and 2038 were not offered to retail. There is a par call in 2016. Financial Security Assurance insured bonds maturing after 2010 and the deal has underlying ratings of Aa3 from Moody’s, AA-minus from Standard & Poor’s and AA from Fitch. The rest of the deal is taxable.
Visible Supply
The Bond Buyer’s 30-day visible supply increased today by $1.83 billion to $7.44 billion. The total is comprised of $2.31 billion of competitive deals and $5.13 billion of negotiated bonds.
Previous session’s activity
The Municipal Securities Rulemaking Board reported 29,788 trades yesterday of 13,198 separate issues for volume of $16.86 billion. Of all bonds traded, 1,817 changed hands at least four times. Most active was South Broward Hospital District in Florida 4 1/2s of 2037, which traded 78 times at a high of 100.8, a low of 97.8 and an average of 98.902.
