NEW YORK – The California municipal market was mostly flat Wednesday amid light to moderate secondary trading activity.
“I’m not seeing a whole lot of movement,” a trader in San Francisco said. “There was some activity in the secondary, but it felt sideways to me.”
The Municipal Market Data triple-A 10-year scale climbed one basis point Tuesday to 3.39%, the 20-year scale rose one basis point to 4.62%, and the scale for 30-year bonds increased three basis points to 4.95%.
Wednesday’s triple-A muni scale in 10 years was at 92.9% of comparable Treasuries and 30-year munis were at 105.1% according to MMD. Meanwhile, 30-year tax-exempt triple-A general obligation bonds were at 111.5% of the comparable London Interbank Offered Rate.
Treasuries showed gains Wednesday. The benchmark 10-year note was quoted recently at 3.66% after opening at 3.73%. The 30-year bond was quoted recently at 4.71% after opening at 4.77%. The two-year note was quoted recently at 0.81% after opening at 0.85%.
"We’ve had very light supply and a very thin market," said Adam Mackey, managing director of municipal fixed income at PNC Capital Advisors. "I certainly think there is a calm before the storm right now, where there’s no depth and the market’s just trading really thin."
In a research note, Bonddesk Group wrote that, though retail investors in the mutual fund market have pulled money out of munis in droves over the past few months, the buy/sell ratio for municipals in January was 2.6, which “indicates that there are substantially more individual buyers than sellers of municipal bonds, which makes sense because many municipal owners are buy and hold investors.”
The report also notes that “the past three months have been a remarkably active period for the retail market for municipal bonds. Following a year of relative calm, yields and trade volumes started surging in November and continued through December and January.”
In total, January saw 403,218 buys as opposed to 154,061, producing the 2.6 ratio. This is considerably higher than the ratio in the corporate bond market, which was 1.2 in January, according to the report.
The economic calendar was light Wednesday.
Previous Session's Activity
The most actively traded security in the state yesterday was San Marcos Redevelopment Agency 8.5s of 2030, which traded 69 times at a high of 100.998 and a low of 98.002.
