Wednesday's session opened with moderate trading in the municipal bond market, giving it a solid tone.
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"There's a little bit of action this morning, a little bit of flow, but it's not terribly busy so far," he said. "The muni market feels pretty solid. No one's giving up too much, maybe a basis point or so, to get things done."
Long-term supply is likely keeping yields where they are, the trader said. Although there's more issuance this week than last week, he added, it's not being received in a way that lightens levels.
Potential long-term volume is expected to pick up this week, to an estimated $4.88 billion. More help may be coming; The Bond Buyer's 30-day visible supply for Wednesday shows $7.08 billion expected.
Few deals are scheduled to price Wednesday, with most due Thursday. JPMorgan, though, plans to hold a second retail order period for the week's biggest issue, $896.2 million of New York City Transitional Finance Authority tax-secured subordinate bonds in three series.
The deal generated roughly between $160 million and $200 million in orders on the day, the trader said. No maturities are shut, as of yet, he added.
"I think it's priced right," he said. "There's just lack of interest right now. No one wants to put their money to work just yet; they all think rates are going to come so far up that they'll be able to get this great deal, and realistically, that's not going to happen."
Puerto Rico bond trading prices continue to increase, Alan Schankel, managing director at Janney Capital Markets, wrote in a research note.
Long maturity blocks of Puerto Rico Sales Tax Financing Corp., or COFINA, bonds traded at lower yields last week. On Tuesday, a million dollar block of Puerto Rico general obligation 5s of 2041 printed on Municipal Securities Rulemaking Board at 8.20%, far under the 8.78% to 9.01% seen for block trades earlier this month, he added.
"Although details are scarce, the commonwealth plans to sell bonds in coming weeks, probably using a COFINA third-lien structure, so firmer secondary trading levels will be welcome," Schankel wrote.
Yields on the Municipal Market Data triple-A scale started Wednesday marginally weaker beyond six years on the curve. Bonds maturing beyond that point are flat to one basis point higher.
The 10-year triple-A yield rose one basis point Tuesday to 2.62%. The 30-year held at 3.98%, while the two-year remained unchanged at 0.34% for a seventh straight session.
Yields on the Municipal Market Advisors benchmark triple-A scale hovered Tuesday, rising and falling in select maturities across the curve by as much as one basis point. The 10-year triple-A yield held at 2.61%. The 30-year inched up one basis point to 4.19%, while the two-year remained at 0.33%.
Treasury yields Wednesday continue to rise. The 10-year yield has increased three basis points to 2.90%. The 30-year yield has climbed three basis points to 3.83%, while the two-year yield has risen two basis points to 0.41%.
In economic news, the Bureau of Labor Statistics reported Wednesday that U.S. producer price numbers for December arrived near anticipated levels. December PPI registered a 0.4% gain; core rose 0.3%, or 0.2688% unrounded.
The numbers meant a 1.2% increase in total, as well as a 1.4% rise in core, for 2013. Still, averaging December numbers against prior months' figures shows inflation remains in check.
