The tax-exempt market headed lower Wednesday morning as price discovery remained difficult in an illiquid market.
One trader focused on the high-yield market said he's seen bonds as much as five to 10 points off. "It's a liquidity thing and capital flows are all over the place," the Rhode Island trader said. "When people open up their statements this week it will show the values of mutual funds and individual bond holdings and they are going to be surprised because for an awfully long the time the number went up and here's a change to see a reverse."
He added that anything with yield attached has sold off hard.
In the primary, demand has been light this week even though traders though June 1 reinvestment money would help support the market.
Later Wednesday, Citi is expected to price $260 million of Portsmouth, Va., general obligation public improvement and refunding bonds, rated double-A by the rating agencies.
Citi is also expected to price $250 million of Riverside, Calif., tax and revenue anticipation notes, rated SP-1-plus by Standard & Poor's and F-1-plus by Fitch Ratings.
Tuesday, yields on the Municipal Market Data scale ended as much as five basis points weaker. The 10-year yield rose two basis points to 2.10% and the 30-year yield increased five basis points to 3.29%. The two-year was steady at 0.30%.
Yields on the Municipal Market Advisors 5% scale ended as much as five basis points higher. The 10-year yield rose two basis points to 2.16% and the 30-year yield rose five basis points to 3.39%. The two-year finished steady at 0.36% for the fifth session.
Treasuries were steady to stronger Wednesday morning. The benchmark 10-year and 30-year yields fell one basis point each to 2.13% and 3.29%, respectively.
