|
|
Fresh Bond Supply Stirs Investor Interest
California Municipal bonds are seeing a fair amount of customer inquiry in the
market’s front end, although interest in the long ends of the taxable and
tax-exempt markets is weak. Why? Supply has reappeared in the primary and
secondary markets. Large mutual funds continue to lose cash, forcing them to
sell off positions on the bid side. Meanwhile, a $1.25-billion General
Obligation issue for the L.A. Unified School District and a $1.5-billion
Illinois G.O. topped last week’s primary calendar. Both deals had Build America
Bonds and tax-exempts.
Taxable Build America Bonds will be nearly 20% of $4.1 billion in primary
issuance (about $845 million) this week. The remaining $3.25 billion will
include more than $1 billion of healthcare bonds. That amount would usually be
easy to absorb but continuing outflows of cash from funds and heavy dealer
inventories have made placing bonds a monumental task. Government bonds posted
large losses across the curve last week, making it even more difficult.
The Federal Reserve’s move to raise the discount rate 50 basis points to nudge
banks back into the private sector and not depend on government caused a sharp
sell-off of stocks and bonds. The Treasury also announced it will sell $126
billion Treasury Bonds this week, including $44 billion in 2-years, $42 billion
in 5-years, $32 billion in 7-years, and $8 billion in TIPs. These factors are
making the market cheaper and might create a nice buying opportunity. Please
contact us for a full run of Municipal offerings.
10-Day
Yield History of U.S. Treasuries and
Bond Buyer 40 Municipal bond Index |
| |
30yr |
10yr |
5yr |
2yr |
B.B. Index |
| February
22 |
4.728 |
3.797 |
2.444 |
0.887 |
5.35 |
| February
19 |
4.704 |
3.775 |
2.451 |
0.920 |
5.35 |
| February
18 |
4.732 |
3.803 |
2.474 |
0.928 |
5.35 |
| February
17 |
4.698 |
3.733 |
2.386 |
0.847 |
5.32 |
| February
16 |
4.633 |
3.659 |
2.302 |
0.806 |
5.32 |
| February
15 |
4.650 |
3.693 |
2.332 |
0.831 |
5.32 |
| February
12 |
4.651 |
3.695 |
2.332 |
0.831 |
5.32 |
| February
11 |
4.666 |
3.720 |
2.366 |
0.871 |
5.34 |
| February
10 |
4.637 |
3.692 |
2.366 |
0.879 |
5.35 |
| February
9 |
4.585 |
3.647 |
2.315 |
0.831 |
5.34 |
California Bonds currently trade at the following yields:
| |
30yr |
10yr |
5yr |
1yr |
| Cal Insured High
Grade (par coupon) |
4.84 |
3.57 |
2.08 |
0.35 |
| Cal Non-Rated |
7.00 |
5.75 |
5.00 |
3.00 |
Short Term Rates:
CA Exempt Weekly Variable Rates: 0.20%
Taxable Weekly Variable Rates: 0.30%
The information contained herein is based on sources that E. J. De
La Rosa & Co., Inc. (DLR) believes to be reliable, but it is neither
all-inclusive nor guaranteed by DLR, and it may be incomplete or condensed. The
information and opinions herein, if any, are subject to change without notice,
and DLR does not undertake to advise the reader of changes in opinion or
information. Some of the securities DLR follows may be unrated or below
investment-grade municipal bonds, or are high-yield corporate bonds, that
typically involve a higher degree of risk and more volatility than rated or
investment-grade municipal bonds, or investment grade corporate bonds.
Therefore, certain debt securities discussed in this update may be unsuitable
for some investors, depending on their specific investment objectives,
financial condition, and needs. This update is for informational purposes, and
under no circumstances is it to be construed as a recommendation, an offer, or
the solicitation of an offer to buy or sell any particular debt security. DLR
may make a market in or trade for its proprietary account the securities
discussed in this update. Also, DLR may have been a manager or co-manager of a
public offering of municipal bonds or other debt securities within the last
three years for issuers named herein. DLR or its managing partners, directors,
and employees individually, or their family members, may have either long or
short positions in the securities mentioned, and may purchase or sell these
securities from time to time in the open market or otherwise for their own
accounts or the accounts of others.
|