This week's jump in volume will boost the performance of deals priced in the primary, market participants said.
Traditionally high volume weeks concern issuers because the amount of bonds coming to market could potentially dilute the performance of their sale, since buyers may opt to buy into a different deal. Traders said that because volume came in lower than expected last week the market is so hungry for bonds the increase in volume will bring more attention to the primary and escalate the amount of investors buying into the deals.
Volume is expected to total $7.37 billion this week, up from $4.10 billion last week, according to data provided by The Bond Buyer and Ipreo. Investors originally expected $6.34 billion to come in last week.
Traders pointed to the success of the $305.87 million Delaware general obligation deal's retail order period on Monday as an example of how the increased volume this week is causing investors to pay more attention to the primary.
"We learned our lesson last week, you have to grab the stuff when it' available," a trader in New York said. "Delaware's a solid credit, a triple-A. But we're really drawn to it because everyone is buying anything that is available right now, and this week looks like it will be the time to go in."
Yields ranged on the bonds from 0.27% with a 2% coupon in 2016 to 3.08% with a 3% coupon in 2034.
"It's seeing pretty good interest," a trader in Chicago said.
Some of the bonds maturing from 2018 to 2024, and in 2028 and 2034 are not available for retail order. None of the bonds maturing from 2025 to 2027, and from 2030 to 2033 are available for retail order.
"It looks like those are going to be institutional ones, it looks like they will put a 5% coupon in for those other maturities tomorrow," the trader in Chicago said. "[The underwriters] took advantage of the retail demand in the market for a strong credit."
The bonds can be called at par in 2024, and earned triple-A ratings from the three major rating agencies.
Scales
The municipal market sold off a bit Monday morning, after tightening most of last week. Yields for bonds maturing in six years rose by as much as two basis points, according to Municipal Market Data's triple-A scale. They increased from one to three basis points for bonds maturing in seven to 10 years, from two to four basis points for bonds maturing in 11 to 16 years, and between one and three basis points for the 17- to 30-year maturities.
Treasuries mostly strengthened with the two-year note yield declining by three basis points to 0.36% from Friday. The 10-year yield dropped by two basis points to 2.20%, and the 30-year held steady at 2.98%.
