A lack of follow-through in secondary trading and continued underperformance compared with Treasuries marked the end of a lackluster Monday in the municipal market, as yields were mostly unchanged.
"There's no buzz in the market today," a New York trader said Monday afternoon.
The benchmark triple-A general obligation bond in 30 years ended at a 3.85%, ending unchanged again, according to Municipal Market Data. The yield is 108.8% of the yield of the comparable Treasury bond, which market experts said is still relatively attractive.
"On a ratio basis, the relative value seems more in line with the one-year average for the 10-year maturity and indicative of even stronger value in the 30-year range," analyst Domenick Vonella wrote in a daily municipal commentary. "This is significant because last week, the municipal to Treasury ratios were hovering around one-year lows, representing a large move into value territory in just one week."
Bonds maturing from 2023 to 2044 were all unchanged, according to MMD.
The 10-year benchmark municipal bond, ended at a 2.53% -- 98.1% of the Treasury yield.
Bonds maturing in 2015, 2016, 2019, 2021 and 2022 ended down one basis point, while those in 2017, 2018, and 2020 ended down two basis points.
"The tax-exempt municipal market started the week off on a quiet note, but ended the session with a slightly better tone," Vonella wrote. "There was sufficient evidence of slight gains as led by dealer buying on the back of a stronger U.S. Treasury market. The net result was gains of mostly one basis point on the interpolated MMD AAA scales from 2019 to 2026."
Still, the New York trader said some investors were unimpressed.
"There continues to be limited supply and some of these yields are unappetizing for some buyers," he said.
"You had a pretty good, substantial run in January, and now I think customers are taking a little breather here," the trader added of Monday's lull.
"Between that and between us continuing to underperform, there is no real story with the market," he added.
Treasuries held onto earlier gains, lifted by news that the Institute for Supply Management manufacturing index fell to 51.3% in January, its slowest rate of growth in eight months from 56.5% in December.
That strength helped the benchmark, 30-year Treasury yield close down at a 3.53% after opening at 3.582%, while the 10-year benchmark yield ended at 2.58%, down from 2.626% at the open. The two-year, meanwhile, was quoted at 0.30% at the close of trading, down one basis point from the open.
In the secondary market, the New York trader said one of the only trades that caught his eye was a $60 million block of 5% coupons from California Health Facilities Financing Authority for Stanford Hospitals and Clinics revenue bonds on behalf of Stanford University due in 2043 which traded at a 3.90% yield.
He called it "the trade of the day" because it was slightly cheaper than the generic triple-A scale. He said other bellwether bonds had little unusual activity Monday, according to the trader.
"When you look at NYC 5s or Cal GO 5s, they are trading unchanged or within basis point from where they were trading on Friday," he said.
In addition, he said the market seems to have shrugged off an announcement on Friday by Puerto Rico Gov. Alejandro Garcia Padilla for a balanced 2015 fiscal year budget.
"It's nothing they haven't been talking about before," he said. "The market reception is it's got bigger fish to fry" than Puerto Rico.
On Thursday, Citi will price a $1 billion GO deal that is part of the state's ongoing $31 billion Illinois capital program known as Illinois Jobs Now.
The deal, which is rated A3 by Moody's Investors Service, and A-minus by both Standard & Poor's and Fitch Ratings, should command some attention for its size and presence amid an otherwise slow start to the New Year in which January monthly issuance fell 33.4% compared to 2013, Thomson Reuters reported last week.
This week's estimated municipal volume is down slightly from a revised $4.97 billion last week, according to Thomson Reuters.
The municipal market has been relatively flat since Friday despite Puerto Rico's budget news and the retirement of Federal Reserve Board chairman Ben Bernanke.
His successor, Janet Yellen, took the reins when she was officially sworn in on Monday, following Bernanke's final meeting last Wednesday at which the Fed decided to cut its monthly stimulus spending another $10 billion to $65 billion.
Other new issues will include a $733.13 million bond anticipation note deal from the Grand Parkway Transportation Corporation in Texas by Goldman, Sachs & Co. on Wednesday.
After three weeks of rallying, municipal bonds finished the month with a soft week as the market remained largely unchanged Friday.
