NEW YORK — The municipal market awoke to tight buying in the secondary Tuesday, with yields falling up to seven basis points in the eight- to 21-year range.
The market will also focus on the pricing for the second day of retail orders for $1.8 billion of California general obligation bonds. Monday’s pricing of the GOs saw roughly 12.5% ordered, a trader in New York said. But the numbers could be explained, he added.
“Given the fact that retail investors may have been a little bit more preoccupied with the equity market, with some of the bigger banks reporting [earnings], that they may not have turned their focus to the Cal issues,” he said. “You may see some pickup on that.”
Tax-exempt yields appear set for further firming Tuesday. There is no read yet through five years, according to the Municipal Market Data scale.
Yields from six to 20 years are two to seven basis points lower. Beyond 20 years, they are down three to six basis points.
The benchmark 10-year muni yield lost three basis points Monday to 2.53%. It sits 56 basis points above the record low it held on Sept. 23.
The 30-year yield inched down one basis point to 3.71%. The two-year yield held steady at 0.45% for a fourth straight session.
Treasury yields have started the day lower, particularly from the belly of the curve on out. The benchmark 10-year Treasury yield has fallen six basis points to 2.17%. On Monday, it dropped eight basis points.
The 30-year has declined five basis points to 3.09%, after plunging nine basis points on Monday. The two-year yield has inched up one basis point to 0.28%.
The industry estimates the municipal bond market should see $6.7 billion in new issuance this week. Last week’s number was revised downward to $4.5 billion.
Three deals in particular are expected to provide a large block of the volume.
Goldman, Sachs & Co. is expected to lead 28 other firms on the $1.8 billion California GO deal.
In the competitive market Tuesday, $156.3 million of Virginia College Building Authority educational facilities revenue bonds for the Public Higher Education Financing program are up for grabs.
In economic news, the Labor Department reported Tuesday that the producer price index increased 0.8% in September on a seasonally adjusted basis. The index was flat in August.
Core producer prices, excluding food and energy, rose 0.2%. Economists polled by Thomson Reuters estimated the overall September gain would be 0.2% and core producer prices would rise 0.1%.
