Tax-exempts ended lower for the week as the year’s largest slate of new issuance overwhelmed the market. Most deals took concessions this week to get done.
“Munis are pretty much based on the primary, and with the big supply that came last week, people are just concerned about that,” a New Jersey trader said. “They are trying to get their sights on the new issues and put away bonds at new levels.”
The secondary market was calm, he added. “We were still heavy during the week, but Friday is quiet.”
This week, the market will be helped by the smaller expected supply, the trader said. “As time goes on and it gives retail more time to work on the issues that come, it will whittle it down,” he said.
In other news, Harrisburg, Pa., announced it plans to skip its March 15 general obligation bond payment of $5.3 million. The New Jersey trader said the New York market has not been affected by the news.
The default is “already priced into the market,” a New York municipal analyst tweeted.
Munis were weaker for the week, according to Municipal Market Data. The 10-year got hit the hardest with yields rising 14 basis points during the week. The 30-year yield jumped four basis while the two-year yield rose one basis point throughout the week.
On Friday, the two-year yield closed steady at 0.27%, one basis point above its record low of 0.26% it held since Feb. 16. The 10-year yield and the 30-year yield held steady at 2.05% and 3.31%.
Treasuries were slightly weaker. The two-year yield and the benchmark 10-year yield rose one basis point each to 0.33% and 2.04%. The 30-year yield rose one basis point to 3.19%.
In the secondary market, trades reported by the Municipal Securities Rulemaking Board showed weakening over the past week.
Bonds from an interdealer trade of Pennsylvania Turnpike Commission 5s of 2034 yielded 2.02%, 10 basis points higher than where they traded a week before. Bonds from an interdealer trade of Chicago 6.034s of 2042 yielded 5.63%, eight basis points higher than where they traded the previous week. Bonds from an interdealer trade of New York Liberty Development Corp. 5s of 2044 yielded 4.31%, seven basis points higher than where they traded the previous week.
Muni-to-Treasury ratios rose as munis underperformed Treasuries and became cheaper. The five-year ratio jumped to 88.6% on Thursday from 77.8% on March 1, when munis began weakening. The 10-year muni-to-Treasury ratio spiked to 101.5% on Thursday from 93.6% at the beginning of the month. The 30-year ratio rose to 104.1% from 103.8%.
The 10- to 30-year slope of the curve also collapsed. On Thursday, the slope closed at 126 basis points, down from 169 basis points at the beginning of the year.