The tax-exempt market continued to trade with a firm tone Tuesday afternoon as traders said muni-to-Treasury ratios were looking more attractive.
"The market is feeling OK today," a Los Angeles trader said. "It continues to feel constructive and the front end still feels pretty good and it's holding up well. Treasuries are supportive today which they haven't necessarily been over the last week and a half."
This trader said firmer Treasuries are making municipals look more attractive on a relative basis. "We were rich to Treasuries coming in to today but the Treasury moves have helped a little. We are coming back into more attractive ratios."
He added there is not a lot of supply this week which is helping give the market a good tone.
In the primary market, Bank of America Merrill Lynch is expected to price $117.9 million of Oklahoma Municipal Power Authority power supply system revenue bonds, rated A by Standard & Poor's and Fitch Ratings.
In the competitive market, Ohio auctioned $219.3 million of infrastructure improvement general obligation bonds in two series, rated Aa1 by Moody's Investors Service and AA-plus by Standard & Poor's and Fitch Ratings.
Bank of America Merrill won the bid for the first series of $150 million. Yields ranged from 0.17% with a 2% coupon in 2014 to 3.00% with a 4% coupon in 2033. The bonds are callable at par in 2022 except those maturing in 2023.
JPMorgan won the bid for the second series of $69.3 million of refunding bonds. The bonds ranged from a 5% coupon in 2016 to a 5% coupon in 2025. Prices were not yet available.
On Monday, the Municipal Market Data scale finished a few basis points stronger. The 10-year and 30-year yields fell two basis points each to 1.78% and 2.87%, respectively. The two-year closed flat at 0.36% for the fourth consecutive session.
Treasuries gained Tuesday afternoon. The benchmark 10-year yield dropped three basis points to 1.87% while the 30-year yield fell two basis points to 3.08%. The two-year yield fell one basis point to 0.27%.