NEW YORK – The week between Christmas and New Year’s has typically been one of the slowest weeks of the year. But this year, which has been atypical for many reasons, the last week of December has been anything but boring.
The 10-year muni yield broke records this week. On Friday, the 10-year muni yield fell three basis points to 1.83%, to set a record low as recorded by Municipal Market Data. Friday’s record broke the previous record set Thursday at 1.86% and Thursday’s record broke the previous record of 1.87% set Wednesday. The prior 1.91% record was set the week before Christmas.
Throughout the week, the 30-year yield fell eight basis points to 3.55%. The two-year yield held steady at 0.36% on Friday for its 17th consecutive trading session.
Treasuries strengthened all week. The two-year yield fell five basis points to 0.25%. The benchmark 10-year yield fell 14 basis points during the week to close at 1.88%. The 30-year yield fell 15 basis points throughout the week to close at 2.89%.
And it was not only a strong finish during the last trading week of 2011, but a great year for the entire muni sector.
“What a year this has been,” said MMD’s Randy Smolik. “It certainly was a very rewarding one for munis.” The 10-year triple-A muni yield fell from 3.21% to 1.83%, Smolik said. “These are all-time historic yield lows for the 10-year benchmark and ratios to Treasuries will rest at the annual average of 97.3%.”
On Friday, it came down to the last minute for traders looking for bonds during the final trading session of 2011. “People are looking for bonds but not paying list prices,” said a trader in New York. “They are not being aggressive and there is no bid side, but they are throwing out some bids to see if anyone bites.”
“If you had to buy bonds [Friday], you had to pay up,” wrote Smolik. “Secondary offerings were very thin as many dealers have simply pulled offerings until January trading begins. Those who offered bonds did so in a very protective manner. And, like every day this week if you had to buy bonds, you had to reach.”
Looking ahead to next week’s calendar, the municipal market can expect $543 million in new issuance, down from this week’s revised $3.95 billion of new issuance. Roughly $323.3 million in negotiated deals are expected, down from this week’s revised $3.6 billion, which includes the Michigan unemployment fund deal, which sold unexpectedly. In the competitive market, about $219.7 million is expected, down from this week’s revised $305.4 million.
On the negotiated calendar, RBC Capital Markets is expected to sell $171 million of Texas Tech University System Board of Regents bonds Thursday.
On the competitive calendar, the largest deals are expected to come to market Thursday with New York’s Suffolk County Water Authority offering $83.64 million of revenue bonds and Texas A&M University System Board of Regents auctioning $65 million of bonds.
Rounding out the top five biggest deals for the week, Arkansas’s Little Rock School District will sell $44 million of bonds in the competitive market Wednesday. Stone & Youngberg is expected to issue $40 million of Bonita Canyon Public Facilities Finance Authority debt.
