CREDIT MARKETS
Treasuries:
Treasuries remained mostly under pressure as their yields rose Wednesday, after minutes of the Federal Reserve’s latest meeting showed central bankers saw the recession worsening in January but provided few specifics on possible purchases of Treasuries. The Fed updated its economic forecasts, predicting that the economy would likely shrink between 1.3% and 0.5% this year, and grow about 2.5% to 3.3% in 2010. The Fed also said consumer prices would likely rise 0.3% to 1% this year. Wednesday’s selling in government bonds was also attributed to profit-taking after the previous session’s strong gains. Investors also sold government bonds ahead of announcements, due on Thursday, about what are already expected to be huge auctions of two-, five- and seven-year notes next week. The government will sell $41 billion in two-year notes, $31 billion in five-year notes and $25 billion in seven-year notes next week. Economic news tomorrow will focus on PPI, initial jobless claims and leading indicators.
Municipals:
The Georgia State Road and Tollway Authority plans to complete the week’s largest U.S. municipal bond offering as benchmark tax-exempt borrowing costs remain near a two-decade low. The Georgia agency is selling $600 million of bonds backed by federal highway aid rated Aa3 by Moody’s Investors Service to fund projects for relieving congestion. Underwriters led by Barclays Plc will take orders from institutions such as funds and insurers today, after selling “about a third” of the deal to individual investors yesterday, said Cherie Gibson, spokeswoman for the Atlanta-based authority. “Demand was especially strong from trust funds and investment advisers buying on behalf of retail.”
Yields on five-year, Aa3 state and local government bonds were 2 percent yesterday, close to the record low of 1.95 percent reached Feb. 5. Tax-exempt debt edged lower as some buyers balked at yields that dropped more than two percentage points in four months. “Demand should be resilient enough to keep yields generally range bound in the near term.”
Since December, municipal securities have outperformed Treasuries by the most on record. Investors sought tax-exempt yields exceeding their taxable counterparts as the U.S. moved to boost borrowing to pay for stimulus and financial bailout programs. The final read on the MMD was: 2010-2013 yields were higher by 2-3 bpts; 2014-2015 yields were lower by 4 bpts; 2016-2039 yields were lower by 1-3 bpts.
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Commentary/New Issues
Corporate:
$16 BLN, Roche Holdings, Aa1/AA-, 6 part $3 BLN, 1YR, 3ML+100bp; $750 MM, 2YR, 3ML+200bp; $2.5 BLN, 3YR, +335bp; $2.75 BLN, 5YR, +335bp; $4.5 BLN, 10YR; +345BP; $2.5 BLN, 30YR, +365BP $300 MM, Goodrich Corp., 6.125%, 3/1/19, Baa2/BBB+, 350bp $550 MM, Canadian Nat’l Rlwy, 5.55%, 3/1/19, A3/A-, +295bp
ABS:
Nothing
Agency:
$10 BLN, Freddie Mac, 2.125%, 3/23/12, +88bp $250 MM, FHLMC, 3.375%, 2/27/14, at par
New Issues larger than $250mm. The fixed income offerings mentioned above are for informational purposes only. Toussaint Capital Partners, LLC, member NASD/SIPC, and/or its affiliates may be a participant in the offering mentioned and therefore offerings will be subject to availability.
All statistical data is sourced from Bloomberg Financial Markets.