The tax-exempt market ended on a mostly steady tone as trading got off to a slow start for the beginning of the week.
Muni bond participants said that similar to last week, activity this week was expected to remain calm with limited new issue supply.
“It seems fairly quiet,” a New York trader said.
Others agreed that with limited supply, muni trading momentum was limited. “Munis are fine,” a second New York trader said. “They have a relatively decent tone but there is very little going on. Maybe you couldn’t sell bonds at your price but you could sell close enough — especially with so little supply.”
“This week the new issue calendar is again light, and trading is expected to be range-bound,” wrote Dan Toboja, vice president at Ziegler Capital Markets. “With such limited supply there isn’t nearly enough paper to dislocate the market from the current levels. Yield paper is still in great demand, and we’ve seen spreads come in. If more yield paper doesn’t come in the primary we may see desks chase into the lower-rated bonds as well. Until we get some direction from the broader Treasury market about mid- to long-term rates, we’re unlikely to see a significant correction.”
About $4.35 billion in municipal bonds are expected to come to market this week, including $2.42 billion in negotiated deals and $1.93 billion on the competitive calendar.
The biggest deal to price Monday was $60 million of Illinois Educational Facilities Authority adjustable rate revenue bonds for the University of Chicago. The bonds were priced by Wells Fargo Securities and are rated Aa1 by Moody’s Investors Service, AA by Standard & Poor’s, and AA-plus by Fitch Ratings.
The bonds were priced at par with a 1.1% coupon in 2036 with a mandatory tender date in 2018.
In the secondary market, trades compiled by data provider Markit showed mostly strengthening.
Yields on Philadelphia Hospital and Higher Educational Facilities Authority 5.625s of 2042 dropped three basis points to 4.25% while Emory, Calif., Unified School District 5s of 2045 fell two basis points to 3.66%.
Yields on New York’s Liberty Development Corp. 5.25s of 2035 and Salt River Project, Ariz., Improvement and Power District 5s of 2032 fell two basis points each to 3.96% and 2.22%, respectively.
Other trades were weaker. Yields on District of Columbia student dormitory 5s of 2045 jumped three basis points to 4.31% while Ohio’s Buckeye Tobacco Settlement Financing Authority 5.125s of 2024 increased two basis points to 6.30%.
Municipal bond market reads finished steady to stronger Monday.
The Municipal Market Data triple-A GO scale ended steady to two basis points firmer. The two-year yield fell two basis points to 0.32%. The 10-year yield was steady at 1.80% for the third straight session while the 30-year yield closed flat at 2.86% for the fifth straight session.
The Municipal Market Advisors 5% coupon triple-A benchmark scale ended steady for the second straight session. The 10-year yield and the 30-year yield were flat for the third consecutive session at 1.83% and 2.94%, respectively. The two-year closed unchanged at 0.35% for the 11th session.
Treasuries ended slightly stronger Monday. The benchmark 10-year yield fell one basis point to 1.96% while the 30-year yield dropped two basis points to 3.16%. The two-year was steady at 0.27%.
