NEW YORK – The California municipal market showed losses Tuesday for the first time in more than a week, following Treasuries, in light to moderate secondary trading.
“I wouldn’t call it substantially any weaker by any stretch, but there did appear to be a weaker tone today,” a trader in San Francisco said. “We weakened probably two or three basis points in line with Treasuries. There was some decent activity in the secondary, though still on the lighter side.”
The Municipal Market Data triple-A 10-year scale climbed three basis points Tuesday to 3.34%, the 20-year scale increased one basis point to 4.57%, and the scale for 30-year bonds rose one basis point to 4.79%.
In the daily MMD commentary, Randy Smolik wrote “the trend to weaker taxable prices brought a halt to an over one-week old rally in munis.”
“Sell pressure remained controlled,” he wrote. “There was no evidence of forced selling. Although sellers were more flexible on offerings, the adjustments seemed slight secondary offerings tended to be modest to light.”
Tuesday’s triple-A muni scale in 10 years was at 96.8% of comparable Treasuries and 30-year munis were at 103.7% according to MMD. Meanwhile, 30-year tax-exempt triple-A general obligation bonds were at 109.6% of the comparable London Interbank Offered Rate.
Treasuries showed some losses Tuesday. The benchmark 10-year note was quoted recently at 3.45% after opening at 3.37%. The 30-year bond was quoted recently at 4.62% after opening at 4.57%. The two-year note was quoted recently at 0.62% after opening at 0.56%.
In economic data released Tuesday, U.S. manufacturing increased in January, reaching its highest level since May 2004, according to the Institute for Supply Management.
The overall economy grew for the twentieth straight time, while the manufacturing sector expanded for the eighteenth time, ISM reported Tuesday.
According to the ISM’s monthly report on business, the ISM index surged to 60.8 in January from 58.5 in December.
Economists polled by Thomson Reuters predicted the index would slip to 58.0.
Construction spending fell 2.5% in December as the dollar amount of construction spending fell to the lowest level more than a decade.
Private construction dropped 2.2%, reversing three consecutive monthly increases. Private residential construction plummeted 4.1%, the largest decline since August.
Economists expected construction spending would be flat in December, according to the median estimate from Thomson Reuters. Construction spending in November was revised to a 0.2% decline from a 0.4% gain previously reported.
Activity in the California new-issue market was light Tuesday.
Previous Session's Activity
The most actively traded security in the state yesterday was San Marcos Redevelopment Agency 8.5s of 2030, which traded 47 times at a high of 100.500 and a low of 98.175.
