NEW YORK - Tax-exempts were unchanged to slightly firmer Monday, kicking off what is typically a light week in the 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%.
Investors clamoring for new supply will be faced with slim pickings this week when long-term volume in the tax-exempt market sinks to an estimated $2.61 billion - less than half of last week's total - as trading and underwriting begins to wind down ahead of Labor Day, according to Ipreo LLC and The Bond Buyer.
After originally being earmarked at $4.77 billion, a revised $5.7 billion actually came to market last week, according to Thomson Reuters.
This week, even the short-term market is void of the significantly sized note deals that have propped up the primary market through much of the summer doldrums.
This week's calendar is even thinner, with a $245 million sale of higher education facilities revenue bonds from the Tennessee School Bond Authority taking the lead.
Planned for competitive pricing on Wednesday, the deal will consist of $226.9 million of tax-exempt bonds and $18.1 million of traditional taxable debt - both structured to mature serially from 2011 to 2040.
The bonds are expected to be rated Aa1 by Moody's Investors Service, AA by Standard & Poor's, and AA-plus by Fitch Ratings.
In the negotiated market, Texas' Harris County Flood Control District is on tap to issue $205 million of contract-tax refunding bonds, which will defease all or a portion of its outstanding commercial paper notes as well as pay the cost of issuance, according to the preliminary official statement.
Goldman, Sachs & Co. plans to price the deal on Tuesday with AAA ratings from Standard & Poor's and Fitch. In a report ahead of the deal, Fitch said its ratings are supported by the district's strong financial management and the conservative budgetary practices of the county's administrative team. Those practices include maintaining large financial reserves, high liquidity levels, and ample taxing margins.
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.
Visible Supply
The Bond Buyer's 30-day visible supply rose $1.059 billion to $6.163 billion. The total is comprised of $1.310 billion of competitive bonds and $4.854 billion of negotiated bonds.
Previous Session's Activity
The Municipal Securities Rulemaking Board reported 30,979 trades of 12,787 issues for volume of $8.50 billion. Most active was North Carolina's Raleigh Airport Authority 4s of 2031 that traded 80 times at a high of 101.500 and a low of 98.368.
