NEW YORK - Tax-exempts were unchanged to slightly firmer Monday, kicking off what is typically a light week in the California municipal market with a sparsely-traded session.
Though 10-year and 30-year muni yields remained flat, 20-year tax-exempt yields dipped two basis points to match their all-time low, established Wednesday.
"There's maybe a bit of firmness in spots, but overall, we're pretty much unchanged," a trader in Los Angeles said. "It's just about the quietest week of the year kicking off here in the muni market, and it doesn't appear that 2010 is going to be an exception. There's not a people around to begin with, and there's just not a lot trading."
The Municipal Market Data triple-A scale again yielded 2.19% in 10 years and 3.30% in 20 years Monday, following 2.19% and 3.32% Friday. The scale yielded 3.69% in 30 years Monday, matching Friday.
Though yields showed little movement Monday, yields have still dropped to new all-time lows in 10-year munis 12 times in the past 16 sessions. Also, 20- and 30-year tax-exempts set new record lows four times in the past seven sessions.
The 20-year yield of 3.30% matches a record low established Thursday, while 2.19% is two basis points higher than the 10-year record of 2.17%, also established Wednesday. The 3.69% level for 30-year bonds is two basis points higher than the all-time record of 3.67%, which also was set Wednesday.
"I'd say we're pretty much flat at this point, but there is still a firmer tone out there," a trader in New York said. "Even with yields moving up Friday, I think it's still very much a firm market out there, and there's a much better chance yields go down again today than rise."
Monday's triple-A muni scale in 10 years was at 86.2% of comparable Treasuries and 30-year munis were at 102.5%, according to MMD, while 30-year tax-exempt triple-A general obligation bonds were at 113.9% of the comparable London Interbank Offered Rate.
The Treasury market showed gains Monday. The benchmark 10-year note was recently at 2.55% after opening at 2.64%.
The 30-year bond was recently quoted at 3.60% after opening at 3.69%. The two-year note was at 0.51% after opening at 0.55%.
Activity in the California new-issue market was light Monday.
In a commentary, Alan Schankel, managing director at Janney Capital Markets, wrote "the coming week could be the slowest non-holiday week of the year for new municipal issuance, so we expect little additional sense of direction, other than following Treasuries lead, until after Labor Day."
Schankel wrote that, next week, "not only will we see more market activity, with traders and bankers back from vacations, but the return of Congress will tee up several issues which have been backburnered this session."
"Perhaps the most significant is the status of Bush era tax cut extensions," he wrote. "Assuming no action, top bracket taxpayers will see their marginal rate jump from 35% to 39.6%, with other brackets rising as well. Under administration proposals, the increase would only kick in for joint filers with annual taxable income above $250,000 annually. The second piece of bond market impacting legislation is the stalled jobs bill, which includes provisions for extending Build America Bonds for two additional years (with reduced federal subsidy levels) as well extending the cap increase for issuance of Bank Qualified bonds."
In economic data released Monday, personal consumption expenditures rose 0.4% in July, as personal income rose 0.2%.
Core PCE, which excludes food and energy costs, increased 0.1% for the month and 1.4% from a year ago.
Disposable personal income, excluding taxes, increased 0.2%.
Incomes in June were flat, and as was consumption in that month.
Previous Session's Activity
The most actively traded security in the state yesterday was taxable Sonoma County 6s of 2029, which traded 53 times at a high of 103.500 and a low of 100.500.
