Market Post: Investors Look for Late Tax-Swaps to Close Out 2013

Investors looking to execute some last-minute tax-swaps constitute much of the action in a holiday-shortened session on the last day of 2013.

Subsequently, the tax-exempt yield curve has thus far held its levels Tuesday, a trader in New York said.

Yields are "pretty much flat right now" across the curve, he said. "Some people are trying to do tax swaps. Anyone here who's bidding is trying to buy something at a cheaper price; I'm looking to buy something cheaper, especially if someone is trying to do early settlements."

Market pros anticipate subdued eleventh-hour trading Tuesday.

No muni bond issuance is expected this week; few muni participants are in the office ahead of the New Year's holiday, sidelining most of the Street. Less than $1 million of competitive offerings is scheduled for auction.

The demand side provided no support, as muni bond mutual funds recorded a 31st straight week of outflows for the week of Dec. 25, according to Lipper FMI numbers. Weekly reporting funds recorded outflows of $1.49 billion; long-term muni bond funds accounted for an increasing percentage of the hemorrhaging, at $1.15 billion.

Yields on the Municipal Market Data triple-A scale have yet to be updated at press time. On Monday they held steady through 21 years, after which they slipped one basis point.

The triple-A, tax-exempt 10-year closed Monday's session steady at 2.77%. The 30-year ticked down one basis point to 4.19%. The two-year yield was unchanged at 0.33% for a 31st straight session.

Yields on the Municipal Market Advisors benchmark triple-A scale on Monday were mostly unchanged across the curve. The 10-year inched up one basis point to 2.79%. The 30-year held steady at 4.41%. The two-year lingered at 0.36%.

As they did Monday, Treasury yields have started the day weaker along the yield curve. The benchmark 10-year yield has risen two basis points to 3.00%.

The 30-year yield has ticked up one basis point to 3.91%. The two-year has inched up one basis point to 0.40%.

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