New Tax-Exempts Languish As Insurers Desert Market
May 04, 2011
Cash-rich property and casualty companies have supported the municipal market at rich levels for most of 2011, but they now appear to be more enthusiastic sellers than buyers. Along with municipal mutual funds, P&Cs contributed to more than $350 million in bid lists Wednesday, as prices fell some 1/4. Late Wednesday, underwriters still held about $58 million of the $120 million Connecticut issue, an unusually large amount for a Double-A-rated credit that is well liked by both insurers and wealthy in-state retail buyers. Senior underwriter Bear, Stearns & Co. said insurer interest in the Connecticut bonds was notably low. Yields on the issue ranged to 5.55% in 2014, in line with market levels for Double-A-rated bonds before a Treasury market retreat Wednesday. Insurer interest was also muted for $135 million in Jersey City refunding bonds brought to market Tuesday, according to lead underwriter Merrill Lynch & Co.. The insurers were said to be taking profits in response to municipals' rich ratios to U.S. government securities. The Jersey City issue, sold to refund about half of the city's outstanding debt, attracted some retail and fund buying, Merrill Lynch said. Still, yields had to be boosted as much as 0.15 percentage point among the shorter maturities, which traditionally appeal to retail. The slow sales were a surprise, particularly given the tight supply of New Jersey debt. Traders blamed the slow primary market, as well as the decline in the secondary, on apathy and on the vacation season. ``We're hearing all sorts of stories about how people can't get in touch with their clients,'' said one trader. ``We hear stories of people trying to reach clients on boats, on planes.''
