NEW YORK – The California municipal market was flat to slightly weaker Tuesday, returning from the long Labor Day weekend with a lightly-traded session during which yields ticked higher in spots.
Traders said tax-exempt yields were sporadically higher, though the market overall was mostly quiet.
“There was somewhat of a weaker tone out there, but there just wasn’t a whole lot trading,” a trader in Los Angeles said. “It’s a short week coming off the long weekend, and there isn’t a lot of new issue volume coming this week, so it was fairly quiet. I’d say maybe a basis point or two better in spots, but overall, you could call it unchanged with a weaker tone.”
The Municipal Market Data triple-A scale yielded 2.27% in 10 years and 3.33% in 20 years Tuesday, following 2.25% and 3.33% Friday. The scale yielded 3.72% in 30 years Tuesday, matching 3.72% Friday.
Tax-exempts have now opened September with an uptick in yield in at least one of the three maturities the first four sessions of the month after doing so just once the entire month of August.
Before the recent sell-off, yields dropped to all-time lows in 10-year munis 12 times in the prior 17 sessions. Also, 30-year tax-exempts set record lows four times in the previous eight sessions, while 20-year munis established all-time lows five times over the same time period.
The record lows currently stand at 2.17% and 3.67% in 10- and 30-year tax-exempts, both established August 25. The 20-year low of 3.28% was set August 31.
Tuesday’s triple-A muni scale in 10 years was at 87.0% of comparable Treasuries and 30-year munis were at 101.4%, according to MMD, while 30-year tax-exempt triple-A general obligation bonds were at 113.4% of the comparable London Interbank Offered Rate.
The Treasury market showed gains Tuesday. The benchmark 10-year note was recently at 2.60% after opening at 2.70%.
The 30-year bond was recently quoted at 3.67% after opening at 3.78%. The two-year note was at 0.50% after opening at 0.51%.
The Treasury Department Tuesday auctioned $33 billion of three-year notes with a 3/4% coupon at a 0.79% yield, a price of 99.88. The bid-to-cover ratio was 3.21. The Fed banks also bought $357.0 million for their own account in exchange for maturing securities.
The economic calendar was light Tuesday.
Activity in the California new-issue market was light Tuesday.
Previous Session's Activity
The most actively traded security in the state yesterday was taxable Sonoma County 6s of 2029, which traded 83 times at a high of 102.705 and a low of 99.500.
