Market Midday Post: Secondary Afloat as Munis Stabilize

The municipal market slowed Wednesday morning after building up momentum earlier in the week on sliding treasuries.

Yields across the entirety of the curve remained mostly stable, traders said, even as two deals offering more than $1.5 billion in bonds were priced for retail orders.

“I think we’re going to wallow around where we are until we get into the new year and the Federal Reserve does whatever they’re going to do with tapering,” a trader on the west coast said in an interview. “Treasuries are off a little bit and munis are mostly unchanged.”

The trader, who deals in the secondary market, said overall the market was better than he would expect given recent economic data. Participants in the primary market agreed.

“After Friday’s economic data, you’d think the government market would’ve gotten crushed, but we’re seeing nice flow today,” one New York-based trader said Wednesday morning. “We’re definitely seeing some buyer interest, seeing some flows, and there’s still a lot of money out there.”

The Bureau of Labor Statistics on Friday said the unemployment rate fell to 7.0%, or 0.25 point less than October’s number. The bureau also reported that the U.S. November employment picture was stronger than expected.

“A lot of the secondary stuff is getting some good pricing,” the west coast trader said. “We’re seeing some stuff out for the bid, seems to be getting some pretty decent prices, better than we would have expected.”

Yields on the Municipal Market Data triple-A scale Tuesday showed bonds with maturities between 2014 and 2043 were steady.

The benchmark 10-year Treasury yield remained unchanged at 2.82%, while the 30-year yield fell one basis point to 3.85%. Yield on the two-year treasury was unchanged at 0.30%.

Total volume for the week is expected to reach $11.33 billion, up from $6.23 billion last week, Ipreo, The Bond Buyer and Thomson Reuters numbers show.

That includes a $1.6 billion Goldman, Sachs & Co.-led utility debt securitization tax-exempt bond issue for the Long Island Power Authority, a deal on which many traders were focused. The bonds are rated Aaa by Moody’s and AAA by Standard & Poor’s and Fitch.

Citigroup Global Markets also brought $1.6 billion of New York thruway authority junior indebtedness obligations for retail pricing Monday morning.  The bonds were rated A3 by Moody’s, and A-minus by S&P.

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