As expected, pricing for Thursday's Texas Transportation Commission deal has come in tight with "solid order flow," said a Southeast-based trader.
The 10-year, the maturity traders have been most interested in, is coming in around a 10 basis point spread to Municipal Market Data's triple-A 5% curve, or 2.22%, said the trader. The contracted spreads were hardly shocking.
"It's pretty difficult to be surprised by this deal at this point," said the trader. "It's triple-A, the supply environment, it all makes sense."
The deal features serial bonds maturing from 2015 through 2036 and large term bonds in 2039 and 2044, said the trader. All the durations have received intense interest, the trader said.
"There's a lot of 5% coupons out long; it's institutional demand we're looking at," said the trader. "This isn't a retail deal."
The strength from the Texas deal is expected to continue boosting municipals, especially when coupled with a improving Treasury backdrop, said traders.
The secondary market also firmed up on Thursday after a light and soft morning, said the Southeast trader. While the market prices expensive, high-grade deals, traders have been looking to find value in the secondary for their books.
"We're focused on the secondary today, finding odds and ends," said the trader. "It's the best place to find value, provided you're willing to grind through tons and tons of offerings. But you can find a few extra basis points of spread, which you really can't in the primary right now."
Meanwhile, the MMD triple-A 5% scale has been largely flat as the market digests the activity. Bonds maturing between 2015 and 2018 and from 2038 through 2044 were steady while those maturing between 2019 and 2037 fell as much as one basis point, according to information provided by TM3.
The Treasury market weakened slightly on Thursday morning after a drop in the 10-year Wednesday that was the largest move since early January and brought yields near the lows of early September, according to Janney Capital Markets. The two-year was flat at 0.52% compared to Wednesday's market close, while the 10-year fell one basis point to 2.41%. The 30-year weakened one basis point in morning trading to 3.13%.
