NEW YORK – The California municipal market was mostly flat Monday amid light to moderate secondary trading activity, as 10-year munis matched its record-low level, which was set on Friday.
“There wasn’t really much activity to speak of today, but it still feels pretty good out there,” a trader in Los Angeles said. “I don’t know that there was any real movement, or that we’re anything other than just flat, but it didn’t feel like there’d been any sort of a change to the overall tone that’s been in the market for the past few weeks. Today was just more about a lack of activity, but we were just flat.”
The Treasury market showed some losses Monday. The benchmark 10-year note was quoted recently at 2.83% after opening at 2.82%. The 30-year bond was quoted recently at 4.02% after opening at 4.00%. The two-year note was quoted recently at 0.55% after opening at 0.50%.
The Municipal Market Data triple-A scale yielded 2.54% in 10 years and 3.60% in 20 years Monday, matching levels of 2.54% and 3.60% Friday. The scale yielded 3.94% in 30 years Monday, matching 3.94% Friday.
Monday’s triple-A muni scale in 10 years was at 90.1% of comparable Treasuries and 30-year munis were at 98.3%, according to MMD, while 30-year tax-exempt triple-A general obligation bonds were at 107.4% of the comparable London Interbank Offered Rate.
In a written report, John Dillon, chief municipal bond strategist at Morgan Stanley Smith Barney, wrote that “beneath the quiet exterior of the normally staid municipal bond market rages an epic battle between absolute yield and relative value, as many market participants bear witness to the carnage.”
“For over a week, the market has essentially been trading ‘sideways’ with no significant gains or losses to report in terms of yields, as 10-year maturity top quality bonds reside at record lows,” he wrote. “When asked about the conflict on a recent afternoon, one trader remarked ‘Well, there’s just not much going on.’ And there you have it. Is this the proverbial tempest in a teapot? We don’t believe so, though we do concede that the excitement level is approaching that of a heated chess match. But before you put this down in favor of your summer reading, consider taking advantage of the recent market strength to prepare your bond portfolio for what could be a very interesting balance of the year.”
Activity in the California new-issue market was light Monday.
The economic calendar was light Monday.
Previous Session's Activity
The most actively traded security in the state yesterday was California 4.5s of 2030, which traded 69 times at a high of 95.263 and a low of 91.948.
