Market Post: Buying Spree Pushes Munis Higher

The buying spree continued in the tax-exempt market Wednesday as munis trade steady or higher for the eighth consecutive session.

“Munis are up again,” a New York trader said.

In the primary market, Bank of America Merrill Lynch is expected to price for retail $392 million of Port of Oakland, Calif., bonds, rated A2 by Moody’s Investors Service and A-plus by Standard & Poor’s and Fitch Ratings. Institutional pricing is expected Thursday.

PNC Capital Markets will price for retail $169 million of Allegheny County, Pa., general obligation bonds, rated A1 by Moody’s and A-plus by Standard & Poor’s. Institutional pricing is expected Thursday. The first series consists of $115 million of GO debt followed by $54 million of refunding bonds.

On Tuesday, the slope of the Municipal Market Data yield curve flattened as yields on the short end rose while yields on the long end fell. The two-year yield increased one basis point to 0.30%, breaking a 42-session streak of trading steady at 0.29%.The 10-year and 30-year MMD yields fell one basis point each to 1.77% and 2.94%, respectively.

Treasuries were stronger for a fourth consecutive session. The benchmark 10-year yield and the 30-year yield dropped four basis points each to 1.64% and 2.81%, respectively. The two-year was steady at 0.27%.

In economic news, sales of new single-family houses dipped 0.3% to a seasonally adjusted annual rate of 373,000 in August. The decline was below the estimated 380,000 rate economists had expected.

“The level of new home sales was below expectations in August, however, sales remained near two-year highs so the trend in these sales still points to a recovery in housing activity,” wrote economists at RDQ Economics. “Also, the median sales price for a new single-family home was 17% higher than that in August 2011 and the highest since March 2007. Given the improvement in homebuilder confidence in recent months, we expect new home sales will continue to trend higher this year.”