Participants in the municipal bond market said trading was slow throughout Monday, with yields firming in some areas of the curve.
Estimates for the coming week's volume point to a lighter offering of new issues than last week's heavy calendar. Potential muni bond volume on the week should total $2.59 billion, from sales of about $10.63 billion last week, per Ipreo, The Bond Buyer and Thomson Reuters.
Several traders said they were looking to the competitive market for the most interesting new paper this week.
"Supply is basically dead apart from some fairly large competitive deals," one trader in New York said in an interview.
Competitive deals scheduled this week include $525 million of Massachusetts general obligation bonds set for auction on Tuesday, as well as $61 million of Marietta, Ga., taxable GOs on Thursday.
"It's pretty slow with some bids out there that are pretty good," a New Jersey-based trader said in an interview. "We're trading at relatively decent levels with markets up not more than a basis point."
The Massachusetts GOs are rated AA-plus by Standard & Poor's and Fitch Ratings, and Aa1 by Moody's Investors Service. The Georgia taxable deal is rated AA-plus by S&P and Aa2 by Moody's. It does not have a rating from Fitch.
"Not too much is happening this morning but we're seeing some offerings out there and some competitive deals that we're looking at," another New York-based trader said. "The market has a stable to more firm tone to it."
Several issues on the negotiated calendar this week top $100 million, including $283 million of Pennsylvania Economic Development Financing Authority parking revenue bonds, for which Guggenheim held a retail order period was held Monday. Institutional pricing will be held Tuesday.
The first series of bonds, $118.6 million of parking system revenue bonds, featured yields from 3.61% with a 5% coupon maturing in 2022 to 5.51% with a 5.25% coupon in 2044. The bonds, insured by Assured Guaranty Municipal Corp., had ratings of A2 by Moody's, AA-minus by S&P and BBB-minus by Fitch.
The second series, $99 million of junior lien parking revenue bonds, had yields from 0.97% with a 5.5% coupon in 2017 to 4.63% with a 5.5% coupon in 2034. Those bonds were rated A1 by Moody's and AA by S&P and Fitch.
The third series of $71 million junior lien parking revenue bonds were insured by AGM and had yields ranging from 0.97% with a 5.5% coupon maturing in 2017 to 4.57% with a 5.5% coupon in 2033. All series of bonds are callable at par in 2014.
On Friday, the Bureau of Labor Statistics said the producer price index, which measures price changes in goods from the perspective of the seller, fell 0.1%, following a decline of 0.2% in October. A softening in the number is typically good for the municipal market, one trader said.
Muni participants are also awaiting the Federal Reserve's, federal open market committee statement, scheduled for Wednesday. It is expected that the Fed will discuss whether or not a slowdown of its bond buyback program is in order.
"I think people are holding their breath a little and maybe some selling off a bit this week," a different trader in New York said. "We may see some selling off in the next week or two but nothing substantial."
Traders remained mix over when they expect the fed to begin a tapering policy, but many expressed the sentiment that any damage done had already been priced into the market after the Fed's intentions were made clear earlier in the year.
"Everyone's concerned about the fed tapering and what effect that will have on interest rates but I think the bond market is fairly insulated going forward," the New York-based trader said, citing higher tax rates and limited volume in 2014.
Trades in the secondary market were mixed on Monday, according to data from Markit.
California tobacco settlement revenue bonds with a 5.125% coupon maturing in 2047 saw yields rise three basis points from 7.99% to 8.02%, and New Jersey economic development authority revenue 5.125s of 2039 gained two basis points to 5.29%.
Connecticut special tax obligation transportation revenue bonds with a 5% coupon maturing in 2033 dipped three basis points to 4.18%, while Maryland health and higher education facilities authority 5s of 2024 fell two basis points to 3.88%.
Yields on the Municipal Market Data triple-A scale Monday were firmer by a basis point on bonds maturing from 2023 to 2039. Bonds with maturities in the shorter and longer end of the curve were unchanged.
Yields on the Municipal Market Advisors benchmark triple-A scale improved in some sections of the curve beyond seven years. The 10-year yield fell one basis point, as well as bonds with maturities in 2028, 2029, and beyond 2038.
Treasury yields fluctuated throughout the day Monday but ended a few basis points higher from Friday. The benchmark 10-year yield gained one basis point to 2.88%, while the 30-year yield climbed three basis points to 3.90%. The two-year yield held steady at held at 0.33%.
"We're fairly active on the retail side, moving a fair amount of paper," one trader in Texas said. "I don't think a lot of people are stocking bonds until after the fed meeting tomorrow. People will decide which way they want to lean."
The Texas-based trader said dealers have been hit so hard this year that they're hesitant to take on risk positions before the end of the year with outflows from municipal bond mutual funds showing no signs of stopping.
