Municipals end flat after Fed hikes rates 25 bps; Morris County, N.J., authority prices bonds

By Sheri Kasprzak

New York, Dec. 16 – Municipals rounded out the session Wednesday unchanged even as Treasuries dipped on the Federal Reserve’s decision to increase interest rates by 25 basis points, market insiders said.

The Federal Open Market Committee’s decision sent Treasuries down, but munis paid little attention.

After the Fed’s decision, the 10-year benchmark Treasury note yield rose by 2 bps to close at 2.30% and the 30-year bond yield rose 2 bps to 3.02%. The five-year note yield rose by 4 bps to 1.75%, and the two-year note yield rose 4 bps to 1.02%.

In a statement after its two-day meeting Wednesday, the Fed noted that it expects continued economic improvement.

“In light of the current shortfall of inflation from 2%, the committee will carefully monitor actual and expected progress toward its inflation goal,” the statement said in part.

“The committee expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate.”

Yields relatively stable

In the broader muni market, tax-free yields remained relatively stable in 2015, with the 10-year MMA triple-A benchmark yield staying within a 60 bps range through the year, said Alan Schankel, managing director with Janney Montgomery Scott LLC.

“Muni-to-Treasury ratios, which averaged 101.5% (10-year), are at the lowest levels of the year as we approach 2016,” said Schankel in a note.

Morris authority brings bonds

Among Wednesday’s light pricing action, the Morris County Improvement Authority of New Jersey sold $61.09 million of series 2015 governmental loan revenue bonds.

The bonds (Aaa/AAA/) were sold through Raymond James/Morgan Keegan.

The bonds are due 2016 to 2024 with 2% to 5% coupons and 0.28% to 1.89% yields, said a pricing sheet.

Proceeds will be used to finance capital improvements throughout the county.

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