Investors are watching how high-grade deals are priced on Wednesday, because they believe it will set the tone for how similarly rated deals, like the $1.1 billion Texas Transportation Commission offering coming Thursday, will be priced.
One deal traders said will be a barometer for the Texas Transportation issuance is the triple-A rated $123.1 million Orange County Sanitation District revenue refunding certificates anticipation notes that J.P. Morgan won the bid for, but for which no information was available at press time.
"We are very interested in the triple-A credits coming to market this week, their pricing gives directionality to muni scales and market," a trader in the Midwest said.
The Orange Sanitation bonds have a single maturity in 2016, and received a triple-A rating from both Standard & Poor's and Fitch Ratings.
"Today's triple-A's will be a good predictor of what tomorrow's triple-A will come in at," a trader in New York said.
The Texas Transportation bonds are highway improvement general obligation bonds, and have J.P. Morgan as their lead underwriter.
Yields Fall on Heels of ISM Manufacturing Report
The ISM Manufacturing Index fell 2.4 points to 56.6, below analysts' predictions that the index would report around 58.
The municipal market strengthened after the index number came out, with yields falling most on the long end of the curve.
Bonds maturing in 23 to 30 years yields dropped from two to four basis points, according to Municipal Market Data's triple-A scale. The 15 to 22 year maturities' yields fell from two to three basis points, the nine to 14 year maturities from two to four basis points, and the seven to eight year maturities from one to three basis points.
Bonds maturing in five to six years yields declined from zero to two basis points, and bonds maturing in four years by zero to one basis point.
The rest of the curve held steady.
The Treasury market also strengthened on Wednesday, with the yields on the two year note decreasing by five basis points to 0.53%. The 10-year dropped by 10 basis points to 2.42%, and the 30-year by eight basis points to 3.13%.
