Municipal bonds strengthened Tuesday as the market showed signs of life amid concerns that the federal reserve will slow its bond buyback program.

“It looks like munis are slightly better on the day along the majority of the curve and that may just be as they’re riding with treasuries as the 10-year benchmark falls,” a New York-based trader said in an interview.  

Traders said the first big institutional pricing for the week, Jefferies LLC-led $700 million of New York City general obligations, was well-received. Jefferies held a second day retail order period for $700 million of New York GO bonds Monday in which yields widened from the initial offering price. Institutional pricing today indicated many of the maturities in the first series were no longer accepting orders.

Yields on the available GOs ranged 0.66% with a 5% coupon maturing in 2016 to 4.35% with a 4.25% coupon maturing in 2031. Yields on bonds in the second series, all of which were still accepting orders, ranged from 0.66% with a 5% coupon in 2016 to 3.59% with a 5% coupon in 2025. Bonds in both series are callable at par in 2024.

“Yields on New York GOs were widened out yesterday, but on the flip side of things it looks like munis are slightly better on the day,” the trader said.

Yields on the Municipal Market Data triple-A scale Tuesday slid as much as four basis points on bonds maturing between 2022 and 2040. Yields on bonds maturing in 2021, as well as between 2041 and 2043, slid as much as three basis points. The shorter end of the curve saw yields drop as much as two basis points.

Treasuries extended Monday’s gains and were  were a large driving factor for munis, according to traders.

“Munis love it when there’s green on the screen in treasuries,” a trader said. “There are not a lot of folks long in inventory so I think we’re largely following treasuries.”

The benchmark 10-year Treasury yield slipped three basis points to 2.82%, the 30-year yield fell one basis point to 3.86% and the two-year was unchanged at 0.30%.

“The preliminary indications for utility debt securitization bonds led by Goldman are shaping up pretty well,” a trader on the west coast said. “Things are a little better as there’s a big new issue calendar this week and those deals are going really well.”

Total volume for the week is expected to reach $11.33 billion, up from $6.23 billion last week, Ipreo, The Bond Buyer and Thomson Reuters numbers show. Including the Goldman-led deal, three deals slated for Wednesday and Thursday will be larger than $1.5 billion.

Yields on taxable utility debt securitization bonds could trade as much as 75 basis points above Treasuries, a Florida-based trader said. With minimum denomination buys on the deal at $100 million, the offer may mirror an institutional deal and come cheaper than expected, he said.

Some traders said they weren’t surprised by the strength of the municipal market in the face of positive recent macroeconomic news. The Bureau of Labor Statistics on Friday said the unemployment rate fell to 7.0%, or 0.25 point less than October’s number before rounding.

The bureau also reported that the U.S. November employment picture was stronger than expected. November payrolls posted gains of 203,000 nonfarm jobs, as well as a positive 8,000 net jobs revision for October.

“All the numbers that came out were good and kind of said that tapering should move forward; now it’s kind of 50-50 whether it happens in December,” the west coast trader said. “You would think that would drive it down but folks are thinking it’s already priced into the market.”

The trader in Florida echoed those sentiments, comparing the threat of the Federal Reserve ending its bond buyback program to the malaise that surrounded markets prior to the turn of the millennium.

“I’m starting to think it might be like Y2K – lots of panic before, but the day it comes, who cares? It’s so widely anticipated,” he said. “It may be a surprise if it comes this month, but bonds are relatively down 100 basis points since the first news a year ago.”

The Treasury Department Tuesday auctioned $30 billion of three-year notes with a 5/8% coupon at a 0.631% yield, a price of 99.982208. The bid-to-cover ratio was 3.55.

Large institutional issues weren’t the only deals to get attention Tuesday. In the town of Basalt, Colorado, 10 bidders vied for the town’s first-ever competitive sale, $5 million of general obligation improvement and refunding bonds.

Stifel Nicolaus took the deal, which included bidders such as Piper Jaffray & Co., Janney Montgomery Scott LLC and UBS Financial Services Inc. The bonds were rated AA by Standard & Poors.

“This result reflects the ability of smaller Colorado issuers to attract broad market interest, especially with the strong financials that many such issuers have maintained,” Bruce Kimmel, Basalt’s independent municipal advisor, said in an email.

Secondary market trades compiled by data provider Markit showed significant strengthening. Yields on San Francisco revenue bond 5s of 2026 slid nine basis points to 2.91%, and yields on Dallas Fort Worth airport revenue 5s of 2035 firmed by five basis points to 5.36%. New York dormitory authority income tax revenue bonds fell two basis points to 1.18%.

Build America Mutual and Assured Guaranty’s Municipal Assurance Corp. announced this week that their municipal-only insurance businesses would now offer insurance through TMC Bond’s electronic trading platform.

Yields on the Municipal Market Advisors benchmark triple-A scale ended lower throughout the entirety of the yield curve. Bonds maturing in 2025 through 2027 and from 2038 to 2040 fell four basis points. Yields on the short end of the curve fell by a basis point.

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