The tax-exempt market ended Monday mostly steady while traders said activity has already started to drop off ahead of the Thanksgiving holiday-shortened week.
With apathy towards record low yields, some traders noted weakening in the short end of the curve but said activity this week is expected to remain low.
“It seems like we are in holiday mode,” a New York trader said. “The $1 billion Texas deal is a one-off. So there is nothing crazy going on today. There are some customer bid-wanteds out but whatever business you see will be Monday and Tuesday. And that will be it for the week.”
He added that overall the week is expected to be quiet. “New issues are quiet this week. It’s a week to digest things you already own.”
The New York trader said the market is mostly steady though slightly weaker on the short end of the curve.
A second New York trader Monday said the market was taking a breather. “It’s kind of slow,” the trader said. “There is still buying though in higher-yield bonds.”
In the primary market Monday, JPMorgan priced $1.4 billion of Texas Municipal Gas Acquisition and Supply Corp. gas-supply revenue bonds, rated A3 by Moody’s Investors Service and BBB by Standard & Poor’s.
Yields ranged from 0.75% with a 3% coupon in 2013 to 4.05% with a 5% coupon in 2032. The bonds are callable at par in 2022. The deal was upped from the schedule $1 billion and yields were lowered as much as 10 basis points in repricing.
JPMorgan also priced for retail $143.5 million of Connecticut Housing Finance Authority housing mortgage finance program bonds, rated triple-A by Moody’s and Standard & Poor’s. Institutional pricing is expected Tuesday. Prices were not available by press time.
Jefferies & Co. priced for retail $90 million of University of Connecticut bonds, rated Aa2 by Moody’s and AA-minus by Standard & Poor’s. Institutional pricing is expected Tuesday. Prices were not yet available.
The Municipal Market Data scale has set new record low yields with each passing day throughout the last week but took a breather Monday. The scale ended flat to one or two basis points weaker.
The 10-year yield held steady at 1.50%, its record low set Friday. That record beat the previous record of 1.51% set Thursday. Before that, the MMD record was 1.54% set Wednesday and the 1.55% set last Tuesday.
The 30-year MMD yield also remained unchanged Monday, holding steady at its record low yield of 2.54% set Friday. The previous record was 2.55% set Thursday and before that, 2.60% set Wednesday and 2.64% set last Tuesday.
The two-year finished steady at 0.30% for the 37th consecutive trading session.
Over the course of November, yields have fallen dramatically, setting fresh record lows over the previous two weeks. The 10-year yield has fall 22 basis points from where it started the month at 1.72%. Similarly, the 30-year yield has dropped 28 basis points from where it started November at 2.82%.
Treasuries suffered Monday from a risk-on trade that pushed investors into risky assets. The benchmark 10-year yield and the 30-year yield rose three basis points each to 1.61% and 2.76%, respectively. The two-year was steady at 0.24%.
In the secondary market, trades compiled by data provider Markit showed mostly weakening.
Yields on Metropolitan Government of Nashville and Davidson County, Tenn., Health and Educational Facilities Board 5s of 2025 jumped four basis points to 1.94% while Puerto Rico Commonwealth Infrastructure Financing Authority 5s of 2046 increased three basis points to 5.05%.
Yields on Delaware River Joint Toll Bridge 3s of 2028 and New York City Transitional Finance Authority 5s of 2023 rose two basis points each to 3.00% and 1.80%, respectively.
Still, other trades showed strengthening. Yields on California’s Port of Oakland 5s of 2029 fell two basis points to 2.97% while Illinois’ Metropolitan Pier and Exposition Authority zeros of 2050 dropped one basis point to 4.93%.
So far this month, muni exchange-traded funds have rallied.
The iShares S&P National AMT-Free Municipal Bond ETF — ticker MUB — rose 0.93% so far this month and 4.41% so far this year.
The SPDR Nuveen Barclays Capital Short Term Municipal Bond ETF — ticker SHM — was flat for the month was increased 0.25% for the year. The PowerShares Insured National Muni Bond ETF — ticker PZA — increased 1.75% since the start of November and rallied 7.16% since the start of the year.
Other popular ETFs, including the Market Vectors High Yield Municipal Index ETF — ticker HYD — rose 0.67% for the month and 11.64% throughout the year while the Market Vectors Long Municipal Index ETF — ticker MLN — rose 2.06% in November and 6.32% throughout the year.
Despite the gains, the muni ETFs mostly underperformed Treasury ETFs.
The ProShares Ultra Seven to 10 Year Treasury ETF — ticker UST — jumped 2.10% this month and 9.14% through 2012.
Most muni ETFs outperformed corporate bond ETFs for the month and the year.
The iShares iBoxx High Yield Corporate Bond ETF — ticker HYG — fell 0.54% for the month and gained only 2.85% throughout the year. The iShares iBoxx Investment Grade Corporate Bond Fund ETF — ticker LQD — fell 0.20% so far in November and gained 6.92% so far in 2012.