The market seemed to take Friday's midday downgrade by Moody's Investors Service of Puerto Rico's general obligation bonds to speculative grade in stride and had a mostly muted reaction to Friday's unemployment numbers, which showed that the U.S. unemployment rate in January hit a five-year low of 6.6%.
On Friday, the generic, triple-A GO scale in 2044 ended at a 3.84%, according to Municipal Market Data.
"After the downgrade, from what I see the trades are marginally weaker, but nothing crazy yet," said one New York trader. "Some of the pieces are weaker, but they have recently been trading at downgraded levels anyway."
In the Northeast, the New York State Mortgage Agency will come to market with a three-pronged offering of revenue debt expected to be priced by Morgan Stanley on Wednesday following a retail order period on Tuesday.
The deal consists of $55.5 million of taxable debt, $59.9 million of tax-exempt bonds subject to the alternative minimum tax, and $63.6 million of non-AMT tax-exempt bonds.
Strong demand for individual bonds among retail and large individual investors has recently outweighed the availability of new supply, according to the New York trader.
For instance, in last week's market, the mammoth Illinois deal was oversubscribed when it was priced by Citi with 5% coupon bonds due in the final 2039 maturity with a 5.04% yield versus the generic, triple-A GO, which ended at a 3.75% at the time of pricing on Thursday, according to MMD.
The state sold $1.02 billion of the bonds, $25 million more than the expected $1 billion. It received $5.5 billion in orders from 109 individual investors, the state's assistant budget director said in a press release.