NEW YORK – The California municipal market remained unchanged Tuesday amid light to moderate secondary trading.
Looking ahead to the rest of the week, new issuance remains bleak.
“The week ahead brings modest new risks, with some vulnerability should Friday’s employment number finally surprise to the upside, or should events in Wisconsin continue to go unresolved,” wrote Matt Fabian, managing director of municipal research at Municipal Market Advisors in his weekly outlook.
“There is also potential for a new hearing in Washington as Congress wrestles with just how concerned it should be over state fiscal health,” Fabian wrote.
Meanwhile, the impact from Tuesday’s testimony from Federal Reserve Board Chairman Ben Bernanke before Congress had more of an impact on the Treasury market than it did on the municipal market, participants said.
The Municipal Market Data triple-A 10-year scale fell one basis point Tuesday to 2.96%, the 20-year remained unchanged at 4.26%, and the scale for 30-year bonds rose one basis point to 4.70% from Monday.
Tuesday’s triple-A muni scale in 10 years was at 86.8% of comparable Treasuries and 30-year munis were at 104.9% according to MMD. Meanwhile, 30-year tax-exempt triple-A general obligation bonds were at 110.1% of the comparable London Interbank Offered Rate.
The Treasury market showed some losses, mostly on the long end Tuesday, following Bernanke’s announcement earlier in the day that the recent surge in oil prices was unlikely to have a big impact on the U.S. economy, but could lead to weaker growth and higher inflation if sustained.
In his comments about the possibility of continued support for the central bank’s quantitative easing program, Bernanke also acknowledged that the risk of deflation and the downside risks to the economy have receded.
U.S. Treasuries prices on the short end began to show signs of shedding some earlier losses by Tuesday afternoon as stock market losses prompted investors to take a new look at U.S. government debt as a safe haven. Ongoing fears of political unrest in the Middle East and North Africa also fed the bid, however, the long end remained weaker.
The benchmark 10-year note was quoted at 3.40% after opening at 3.43%. The 30-year bond remained at 4.48% at Tuesday’s close after opening at 4.50%. Meanwhile, the two-year note was quoted at 0.65%, only slight improvement from 0.68% at the open.
Previous Session's Activity
The most actively traded security in the state yesterday insured Santa Rosa High School District 5s of 2028, which traded 56 times at a high of 98.284 and a low of 94.373.
