A leaden and lackluster municipal market shuffled into the afternoon Monday.
While the retail order periods for some of the week's issuance seep in, market participants, particularly institutions, have been holding their fire in the secondary in anticipation of larger offers to come, giving the market a ponderous tone, a trader in Chicago said.
"Munis don't seem to have much bounce in them," he said. "They don't seem weak, but they don't seem to have much strength."
This week, $7.80 billion of bonds
On the negotiated calendar, $6.73 billion is expected, more than triple last week's revised $1.87 billion. For the competitive market, $1.07 billion should be auctioned, less than half of last week's revised $2.33 billion.
The secondary market hasn't had much pressure because there hasn't been much supply recently, which has made institutional buyers reluctant to participate, the trader said.
"They've been waiting for the new issues," he said of institutional participants. "And even though rates haven't backed up in any dramatic way, certainly they feel more comfortable buying the size they need in the primary market than being forced to lift yields in the secondary."
JPMorgan should lead the way and price $1.3 billion of Regents of the University of California new money taxable and tax-exempt bonds. The offering should arrive in two series: $800 million of tax-exempt debt due to price Thursday, following a retail order period on Wednesday; and $500 million of taxable debt, which should be priced Wednesday.
On Monday, Morgan Stanley priced for retail $839.1 million of New York City general obligation debt. The credits are expected to price for institutions Wednesday, following a two-day retail order period, as a combination of tax-exempt new money and refunding debt.
The market crossed noon Monday weaker in the intermediate part of the curve. Yields of credits maturing between 12 to 20 years were flat to one basis point higher, according to the Municipal Market Data triple-A GO scale.
At Friday's close, the 10-year held steady at 1.90% for the third session while the 30-year yield closed the day at 2.94% for the second session. The two-year closed at 0.31% for the fourth session.
Yields on the Municipal Market Advisors 5% coupon triple-A benchmark scale ended flat to one basis point lower. The 10-year yield held at 1.90% for the third session. The 30-year yield closed at 3.02% for the second session. The two-year finished unchanged at 0.35% for the 19th session.
Treasuries early Monday afternoon firmed across the curve, after starting the morning weaker beyond the front end. The benchmark 10-year yield and the 30-year yield dropped four and three basis points to 1.93% and 3.13%, respectively. The two-year yield ticked down a basis point to 0.26%.
