The municipal market began to pick up the pace from a slow start to the week Tuesday afternoon as pockets of demand arose in the short and long end of the yield curve.
"It's fairly quiet but there are a few bits and pieces that are a little bit busier than yesterday," one trader in New York said in an interview. "The short end is overbought and it's terrible to fight over, but that's where people are. Then there's this cutoff around 2032 or 2035, which nobody wants to buy past, so there's a small market developing on that long end that may come with some buying opportunities in a bit."
Yields firmed on the long end of the curve, a different New York-based trader said. Traders agreed that the market remained quiet ahead of a $1.2 billion Citi-led New York Tobacco Settlement Financing Corporation deal set to price Wednesday.
"If you place something in the negotiated market, it's going to blow up with lots of demand right now," another New York-based trader said. "You might have some big funds that are interested in that deal."
Volume this week is expected to be larger than the week of Thanksgiving, with potential volume totaling $6.55 billion, up from sales of $652.2 million last week, according to Ipreo, The Bond Buyer and Thomson Reuters numbers.
"That tobacco deal is what everyone's waiting for," the first trader said. "The rates look interesting with some kickers and short calls."
Citi held institutional pricing Monday for $134.4 million of Dekalb County, Ga., water and sewerage revenue refunding bonds. The bonds are rated Aa3 by Moody's, A-plus by Standard & Poor's and AA-minus by Fitch.
Yields ranged from 0.46% with a 3% coupon in 2015 to 4.56% with a 5% coupon in 2035. Bonds maturing in 2014 were offered in a sealed bid. All the bonds are callable at par in 2023.
Michigan bonds appeared unchanged as of early Tuesday afternoon even after the federal judge overseeing Detroit's bankruptcy case ruled that the city would be eligible for protection.
"Detroit paper is up in the air right now," one trader said.
Volume for Michigan paper was up 35% from yesterday, a New York-based trader said. The jump didn't seem to reflect any interest in the bonds after the decision though, he said, as there were no major trades evident.
Yields on the Municipal Market Advisors benchmark triple-A scale were mostly steady as of Tuesday morning. Bonds maturing from 2014 to 2022 and 2027 to 2043 were unchanged. Bonds maturing between 2023 and 2026 saw yields rise as much as a basis point.
Treasuries were stronger past the front end of the yield curve. The benchmark 10-year yield fell one basis point to 2.77%. The two-year and 30-year were unchanged at 0.29% and 3.84%, respectively.
