Muni Bonds End Unchanged, Outperforming Treasurys
May 11, 2011
On Wednesday, the spread, which compares the prices of September future contracts in the two markets, increased 15/32 to 6 6/32. ``Nobody has a real solid reason for this. But there are three speculative theories on what's adding to the bid side,'' said E. Randolph Hopper, senior analyst at Municipal Market Data, a division of Thompson Corp.. Two of the theories involve futures dealers bidding up September muni contracts to counteract short positions set up by third parties. A third theory has municipal mutual funds buying futures contracts as a substitute for the dearth of new long-term issues. Meanwhile, municipals in the cash market ended unchanged, slightly outperforming the Treasury market. An $80 million issue of Cleveland parking facilities revenue bonds were scheduled to be priced Thursday, after originally being priced last week and then pulled from the market. The lead underwriter has also been switched from Grigsby Brandford & Co. to a Smith Barney Inc. and A.G. Edwards & Sons team. In preliminary price talk, yields were said to range as high as 5.85% for 5 1/2% securities in 2022, much higher than last week's 5.73% yield for the same bond. Roughly $700 million in new municipal issues were priced Wednesday. In the primary market, offerings of $394.6 million revenue bonds from the Westside State Dormitory Authority and $182 million revenue bonds from Dade County, Fla., were among the day's largest. Traders said the deals were initially priced in line with secondary market yields, but high investor demand for new long-term paper later helped lower some yields by about 0.05 percentage point.
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