The municipal bond market moved little Tuesday even as new bonds hit the market and Janet Yellen gave her first speech as Federal Reserve chair.
Treasury yields jumped as Yellen gave her first appearance since Ben Bernanke's exit, but municipal bond yields finished the day up by just one basis point in some parts of the curve.
"Her addresses could have had a much broader impact, but I don't think people are giving them much credence at this point," one trader in New York said. "I think she affected the Treasury market, but it doesn't seem like there was whole lot of activity as people are just watching."
The focus of the market, if any, was on new bond issues that came in light of a very small supply calendar, traders said.
In a week with dismal new issuance, just $2.56 billion expected, the week's biggest bond issue was Tuesday's $496.4 million Louisiana general obligation competitive deal. In the negotiated arena, there was a $165 million Alameda County, California deal.
"Competitive deals coming to the market are able to get some pretty aggressive pricing right now," the New York-based trader said.
Traders and analysts said some market participants may be on the sidelines waiting for large-scale concerns about Puerto Rico's downgrades and persistently small volume so far this year to subside.
"The other issue people are looking at is weather," the trader said. "Banks that have offices throughout the country have offices that are under siege by cold weather and storms, that's something that's an issue."
Weather forecasters are predicting yet another front of cold weather along the northeastern seaboard from Wednesday through Thursday, with snow accumulation reaching up to a foot in New York by some predictions.
Municipal bonds appeared uninspired Tuesday afternoon, as yields remained unchanged as two of the week's biggest deals came to market.
The competitive Louisiana deal, which featured $347.2 million of tax-exempt GOs and $149.3 million taxable bonds, was brought to market Tuesday morning by Wells Fargo Bank and JP Morgan Securities LLC. The bonds are rated Aa2 by Moody's Investors Service and AA by Standard & Poor's and Fitch Ratings.
Yields on the taxable bonds, managed by Wells Fargo, ranged from 0.22% at par in 2015 to 2.15% with a 2.5% coupon maturing in 2020. The pricing wire noted that yields may appear high, indicating a possible repricing.
Yields on the tax-exempt portion, led by JP Morgan, ranged from 0.51% with a 5% coupon maturing in 2017 to 4% at par in 2034. The tax-exempt bonds are callable 2024.
In the negotiated market, Citigroup Global Markets Inc. led $137.1 million of sales tax revenue bonds for Alameda County, Calif., Transportation Commission.
Yields on the bonds, rated triple-A by S&P and Fitch, ranged from 0.46% with a 3% coupon in 2017 to 2.15% with a 4% coupon in 2022. The bonds do not feature an optional call.
Municipal bond yields measured by Municipal Market Data's AAA general obligation scale were steady across the curve most of Tuesday before ending two basis points higher on bonds maturing from 2038 to 2044. Bonds maturing in 2036 and 2037 were one basis point higher.
Yields on the Municipal Market Advisors scale were a basis point higher on bonds maturing in 2025, 2032, 2034 and from 2039 out.
Fed Reserve Chair Yellen's testimony before the House Financial Services Committee indicated she expects "continuity" in the Federal Open Market Committee's policy. Yellen said she "strongly" supports the strategy, which she helped craft while a member of the panel.
"Let me emphasize that I expect a great deal of continuity in the FOMC's approach to monetary policy," Yellen testified, according to prepared text released by the Fed. "I am committed to achieving both parts of our dual mandate: helping the economy return to full employment and returning inflation to 2 percent while ensuring that it does not run persistently above or below that level."
Treasuries bumped up Tuesday morning, with the 30-year climbing two basis points to 3.68% and the 10-year by three basis points to 2.71%. The two-year yield gained two basis points to 0.34%. Municipals were steady, according to Municipal Market Data's AAA scale.
"I think that was maybe a little surprising that she's saying they've decided to seemingly stay the course when we're right up against the 6.5% unemployment threshold that we thought was going to mean something," one trader in New York said.
Unemployment was 6.6% in January, the government said in a Feb. 4 report. Total payroll jobs in January rose 113,000, following a revised increase of 75,000 for December and after a revised November increase of 274,000.
"How much longer can you have tapering and weakness?" the trader asked. "I thought maybe she'd look at some other indicators but it seems tapering at $20 billion a month is going to remain."
New York Utility Debt Securitization Authority restricting bonds with a 5% coupon maturing in 2041 jumped three basis points to 4.06%, while Ohio Tobacco Settlement Financing Authority bonds with a 6.5% coupon in 2047 slid three basis points to 7.74%.
Illinois general obligation bonds issued last week with a 5% coupon maturing in 2039 climbed two basis points to 4.93%, while Connecticut GOs with a 5% coupon in 2023 fell three basis points to 2.73%.
