The municipal market was unchanged yesterday, as participants endured the session’s expected barrage of new-issue supply.
In the primary market, Bear, Stearns & Co. priced $3.62 billion of tobacco settlement asset-backed bonds for the New Jersey Tobacco Settlement Financing Corp. in three series. The first series, $3.45 billion of senior current interest bonds, mature from 2008 through 2019, with term bonds in 2023, 2026, 2029, 2034, and 2041. Yields range from 3.95% with a 4% coupon in 2008 to 5.02% with a 5% coupon in 2041. The bonds are callable at par in 2017 and are not insured. Moody’s Investors Service rate the credit Baa3 and Standard & Poor’s rates it BBB..
The second and third series are capital appreciation bonds maturing in 2041 worth $184 million. The first subordinate bonds, $124 million of CABs, are rated BBB by Standard & Poor’s. The second subordinate series, $60 million of second subordinate CABs, are rated BBB-minus by Standard & Poor’s. Both are callable at par of accreted value in 2017.
This sale was restructured early this week to remove all 40-year bond maturities due to local political pressure.
A trader in New York said the secondary market was fairly quiet, though not as quiet as it was Monday.
“I think a lot of people were waiting for the leading indicators number, and thought we’d get a little bit of a bounce, but it didn’t happen,” a trader in New York said. “You can pretty much expect this type of market for a while. Fed funds futures seem to indicate that we won’t be getting any movement on that front for at least the next quarter, so we’ll have to continue looking to economic numbers for direction.”
Trades reported by the Municipal Securities Rulemaking Board yesterday were mixed. A dealer sold to a customer Pennsylvania 4s of 2017 at 3.99%, one basis point weaker from Monday. Bonds from an interdealer trade of Henderson Independent School District, Texas, 5s of 2024 yielded 4.24%, up one basis point from Monday. Bonds from an interdealer trade of Ohio 5.5s of 2008 yielded 3.60%, down three basis points from Monday. A dealer bought from a customer Ohio Higher Educational Facilities Commission 5.25s of 2046 at 4.57%, down two basis points from Monday.
The Treasury market showed little movement yesterday. The yield on the benchmark 10-year Treasury note finished at 4.80%, after opening at 4.76%. Meanwhile, the yield on the two-year note, which opened at 4.93%, was quoted near the end of the session at 4.93%.
In economic data released yesterday, the composite index of leading economic indicators rose 0.3% in December after a revised reading of unchanged in November. Economists polled by IFR Markets predicted the LEI would gain 0.3% last month.
Several pieces of potentially market-moving economic data will be released later this week. The economic calendar includes initial jobless claims for the week ending Jan. 20 and December existing home sales come out tomorrow, and December durable goods and new home sales will be released Friday. Economists polled by IFR are predicting 310,000 initial claims, a 6.25 million-unit level for existing home sales, 1.6% growth in durable goods, and 1.047 million new home sales.
In other new-issue activity, Washington led the competitive charge yesterday, selling $786.3 million of general obligation bonds in three series. Series C — $367.7 million of various-purpose GOs — was sold to Lehman Brothers with a true interest cost of 4.41%. The bonds mature from 2008 through 2032, while bonds maturing in 2008, 2029, and 2032 were not formally reoffered. Yields range from 3.68% with a 5% coupon in 2009 to 4.18% with a 5% coupon in 2031. The bonds are callable at par in 2017.
Series D bonds — $402.4 million of motor-vehicle fuel tax GOs — were sold to Merrill Lynch & Co. with a true interest cost of 4.41%. The bonds mature from 2008 through 2030, with term bonds in 2032. Yields range from 3.62% with a 4.5% coupon in 2008 to 4.53% with a 4.5% coupon in 2032. The bonds are callable at par in 2017 and bonds maturing from 2021 through 2024, 2029 and 2032 are insured by Ambac Assurance Corp.
Series E — $36.4 million of motor-vehicle fuel tax GOs — was sold to LaSalle Financial Services, with a true interest cost of 4.51%. The zero-coupon bonds mature from 2013 through 2029, with yields ranging from 4.00% in 2013 to 4.56% in 2029. The bonds are insured by XL Capital Assurance Inc. and are not callable.
Morgan Stanley priced $165.6 million of New York University Hospitals Center revenue bonds for the Dormitory Authority of the State of New York. The bonds will mature from 2008 through 2016, with term bonds in 2022, 2026, and 2036. Yields range from 4.10% with a 5% coupon in 2008 to 4.75% with a 5% coupon in 2036. The bonds are callable at par in 2017. Moody’s rates the credit Ba2, Standard & Poor’s rates it BB, and Fitch Ratings gives it a BBB-minus rating.
Citigroup Investment Banking priced $58.9 million of GO sales tax bonds for Walton County, Ga. The bonds mature from 2008 through 2013 with yields ranging from 3.61% with a 4% coupon in 2008 to 3.76% with a 5% coupon in 2013. The bonds are not callable. Financial Guaranty Insurance Co. insures the entire series. The underlying credit is rated A-plus by Standard & Poor’s.
Finally, Banc of America Securities LLC priced $32.8 million of water and wastewater system revenue bonds for Rio Rancho, N.M. The bonds mature from 2008 through 2032, with yields ranging from 3.60% with a 4% coupon in 2008 to 4.49% with a 4.5% coupon in 2032. The bonds are callable at par in 2017 and are insured by MBIA Insurance Corp. The underlying credit is rated A by Standard & Poor’s and A-plus by Fitch.
