Market Post: Detroit Bids Emerge in Otherwise Quiet Monday

The tax-exempt market opened with some small trades Monday morning as a few Detroit bonds were out for bid.

Friday, Detroit announced it will default on some of its bonds, including a $39.7 million pension certificate payment due June 15.

"I see a Berkshire Hathaway Assurance Corp. insured Detroit water bond out on a bid-wanted and some Assured Guaranty Municipal Corp. Detroit sewer floaters being offered out there too," a New York trader said. "It's not being given away. The offer is well above the pricing evaluations for it."

Outside Detroit bonds, a few retail-sized trades were emerging early Monday. "It's neutral really and quiet. Just odd-lot trades so far."

In the primary market, supply is expected to increase slightly to $6.40 billion from last week's revised $6.18 billion. The negotiated calendar can expect $5.37 billion, up from last week's revised $4.38 billion. On the competitive side, $1.03 billion should be auctioned, down from last week's revised $1.80 billion.

Citi priced for retail $368.7 million of New York City Municipal Water Finance Authority water and sewer system second general resolution revenue bonds. Institutional pricing is expected Tuesday. The bonds are rated Aa2 by Moody's Investors Service and AA-plus by Standard & Poor's and Fitch Ratings.

Yields ranged from 3.42% with a 5% coupon in 2028 to 4.40% with a 4.25% coupon and 4.18% with a 5% coupon in a split 2047 maturity. Bonds maturing in 2039 were not offered for retail. The bonds are callable at par in 2023.

Friday, yields on the Municipal Market Data scale ended as much as four basis points lower. The 10-year yield fell four basis points to 2.23% and the 30-year yield slid two basis points to 3.50%. The two-year was steady at 0.31% for the third session.

Muni yields on the Municipal Market Advisors 5% scale closed as much as three basis points lower. The 10-year yield fell three basis points to 2.33% and the 30-year yield slipped two basis points to 3.62%. The two-year yield fell one basis point to 0.38%.

The Treasury yield curve steepened Monday morning as yields on the short end fell and yields on the long end rose. The two-year yield slid two basis points to 0.27%. The benchmark 10-year and 30-year yields increased two basis points to 2.15% and 3.32%, respectively.

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