Market participants sense a "wait and see attitude" in the municipal bond market this week as trading activity is light.
"There isn't any weakness in the market and no desire to go higher," a West Coast trader said. "We're in market limbo."
Munis began to strengthen Tuesday, with yields falling as much as two basis points on bonds maturing in 2019 and as much as one basis point on bonds maturing in 15- to 22-years. Yields on bonds maturing beyond 2038 and on the short end of the curve were steady, according to the Municipal Market Data's triple-A scale.
Municipal Market Advisors 5% triple-A scale was nearly unchanged from Monday, with the two-year, 10-year and 30-year reporting no change, holding in at .30%, 2.16% and 3.34% respectively.
"The Treasury market is not doing all that much and munis are just sitting there," a New York trader said. "The MMD scale has adjusted downward in the past week."
Treasuries were mixed Tuesday, with the 30-year yield climbing three basis points to 3.27% and the 10-year benchmark rising one basis point to 2.45%. The two-year note fell two basis points to 0.45%.
"If treasures can break out of their range there could be more color in this dead market," the West Coast trader said.
Issuance is expected to increase 24% this week to $6.67 billion from $5.37 billion that Thomson Reuters reported came to market last week.
"The new issue calendar is bigger this week and I don't suspect there will be a problem getting the deals done," the New York trader said.
Trading activity in the secondary market has been light as traders have been waiting to see how deals in the primary price first.
"The week is dominated by three major deals: New York City, Minnesota and the Port Authority," the West Coast trader said. "We're about three quarters through these deals and they seem to be doing fine."
The state of Minnesota has sold $904 million of general obligation bonds in the competitive market on Tuesday in a five-part deal.
"The Minnesota deal is a bit rich," the West Coast trader said. "People have been placing a lot of tight bids."
Bank of America has won the bid for the $438.1 million, $288 million and $123 million portions and with true interest costs of 2.8276%, 2.7098% and 2.00%, respectively.
Yields on the $438.1 million portion ranged from 0.105% with a 5% coupon in 2015 to 2.96% with a 5% coupon in 2034.
Citigroup was awarded a $28.3 million taxable portion of the deal with yields ranging from 0.15% with a 3% coupon in 2015 to 3.68% with a 3.68% coupon in 2032.
The entire deal is callable at par in 2024 and is rated Aa1 by Moody's Investors Service and AA-plus by both Standard & Poor's and Fitch Ratings.
The Alabama University Board of Trustees sold a two-part deal totaling $243.9 million of revenue bonds in the competitive market on Tuesday.
Bank of America won the bid for the $215.3 million portion. Yields ranged from 2.00% with a 5% coupon in 2022 to 3.81% with a 4% coupon in 2044. The bonds are callable at par in 2024.
"The deal was appropriately priced and attractive in spots," the West Coast trader said. "I don't see it effecting the market much either to help or hurt it. It was a retail oriented deal with a lot of coupons."
TD Securities was awarded the $28.6 million part of the deal with yields ranging from 0.14% with a 5% coupon in 2015 to 1.77% with a 5% coupon in 2021.
The entire deal is rated Aa2 by Moody's Investors Service and AA-minus by Standard and Poor's.
The city of New York's $900 million of tax-exempt fixed-rate GO refunding bonds, the largest deal in the negotiated market this week, entered the second day of its retail order period.
"Retail got about $159 million done yesterday," a second trader in New York said. "Maturities didn't sell out so there are plenty left over. They did increase the yields by two basis points in some of the maturities. It's priced fairly for a large deal."
Yields on the $706.7 million portion ranged from 1.00% with a 5% coupon in 2018 to 3.41% with a 5% coupon in 2034. There are sealed bids in 2016 and 2017.
"New York's rating is high relative to a number of years ago," a third New York trader said. "New York bonds have traded well compared to 10 to 15 years ago. The spreads are tight. Looking for a real bargain? You won't find it in New York City. I speculate that it will go reasonably well unless people start to step back because yields have lowered."
Yields on the $193.3 million part ranged from 1.00% with a 3% coupon in 2018 to 3.65% with a 3.50% coupon in 2034. There are sealed bids in 2015, 2016 and 2017.
All of the bonds are callable at par in 2024 and are rated Aa2 by Moody's and AA by both S&P and Fitch. The deal will enter the institutional market on Wednesday.
JPMorgan priced $166.3 million of Idaho Health Facilities Authority St. Luke's Health System Project revenue bonds.
Yields ranged from 0.45% with a 2% coupon in 2016 to 4.06% with a 5% coupon in 2044. The bonds are callable at par in 2024.The deal is rated A3 by Moody's and A-minus by S&P.
The healthcare sector has experienced one of the largest declines in issuance volume so far in 2014, down 35% through June 31, according to data provided by the Bond Buyer. That drought will make the debt especially enticing to the market, the Midwest trader said.
A fourth New York trader noted that the obligor, Saint Luke's Healthcare System was recently downgraded and its liquidity was limited.
On Thursday, Citigroup Global Market will bring a two-fold deal totaling $833.8 million of Port Authority revenue bonds. The bonds mature from 2015 to 2034.
