Market Post: Munis Pause Ahead of Fed Announcement

NEW YORK – The tax-exempt market appeared to stall Wednesday morning as traders waited for more new deals to be priced and ahead of the Federal Open Market Committee’s announcement of a possible extension of “Operation Twist.”

 “It’s been quiet this morning,” a New York trader said, hinting that it is possible munis could be waiting for direction from Treasuries after the FOMC announcement.

Munis were weaker Wednesday morning after two days of being steady to firmer, according to the Municipal Market Data scale. Yields inside five years were steady while yields outside six years rose as much as three basis points.

On Tuesday, the 10-year and the 30-year yield finished flat at 1.86% and 3.15%, respectively, for the third consecutive trading session. The two-year yield was flat at 0.32% for the 13th straight session.

Treasuries were weaker ahead of the FOMC meeting announcement. The benchmark 10-year yield and the 30-year yield each jumped six basis points to 1.68% and 2.79%. The two-year yield rose one basis point to 0.30%.

In the primary market, JPMorgan is expected to price $580.7 million of Louisiana  general obligation refunding bonds in taxable and tax-exempt series. The bonds are rated Aa2 by Moody's Investors Service and AA by Standard & Poor's and Fitch Ratings. The first series of $436.4 million will be tax-exempt follow by a taxable series of $144.3 million.

Goldman, Sachs & Co. is slated to price $624.8 million of Colorado Housing and Finance Authority revenue bonds in taxable and tax-exempt series, rated Aa2 by Moody's and AA by Fitch. The biggest portion of $531.5 million will be taxable followed by $93.3 million of tax-exempt bonds.

In the competitive market, Georgia is expected to auction $141.6 million of GOs.