Puerto Rico general obligation yields continued to inch down on Monday as traders anticipated a light week in the secondary market.
Yields on the island's GO 8s in 2035 fell to 8.81% in Monday trading, down from as high as 9.13% on Friday July 18.
"Funds are reporting that they're feeling better about the situation [in Puerto Rico]," said a trader in Chicago. "We're interested to see if those prices stabilize."
Mondays soft declines in Puerto Rico yields follow a rally that began in mid-July. Since then, yields have plunged from a high of 9.87% on July 8 to today's low. The yield contraction largely followed the rally felt across all fixed-income markets that lifted municipal debt. However, the reaction was delayed, due to investors' concerns surrounding the island's recently passed restructuring legislation.
With no Puerto Rico news anticipated for the week, GO's yields are expected to "hold in" as the island stays largely out of headlines, according to the Chicago trader and another trader based in Virginia.
Traders were also anxiously awaiting the close of a Maryland GO deal slated to price on Wednesday in the competitive markets. The deal will be among just a few triple-A "gold standard" deals to be placed in 2014, which will probably make its impact on the MMD scales tangible. Maryland's GO deal on Wednesday will tap the market for a large $759.6 million and is rated Aaa by Moody's, and AAA by both S&P and Fitch.
Citigroup Global Markets held a retail order period for $100 million of Maryland general obligation bonds. Yields ranged from 0.56% with a 2% coupon in 2017 to 1.49% with a 5% coupon in 2020.
Other smaller issues priced today included JPMorgan Securities' $182.5 million sale of King County, Wash., sewer revenue bonds. Yields ranged from 0.96% with a 3% coupon maturing in 2018 to 3.63% with a 4% coupon in 2035. There is a sealed bid in 2015. The bonds are callable at par in 2024.The deal is rated Aa2 by Moody's Investors Service and AA-plus by Standard and Poor's.
Munis mostly strengthened Monday, with yields on bonds maturing in eight to 11-years falling as much as one basis point and bonds maturing in 12 to 29-years dropping as much as two basis points. Yields on bonds maturing in one to 10-years were steady, according to the Municipal Market Data's triple-A scale.
Treasuries mostly strengthened Monday, with the 30-year yield dropping five basis points to 3.25% and the 10-year benchmark slipping three basis points to 2.46%. The two-year note yield inched up one basis point to 0.50%.
