The tax-exempt market was weaker, following Treasuries, as resistance against record low yields forced prices lower.
Traders said that while yields were higher, activity was still slower than usual.
“It’s quiet,” a New York trader said. “Munis are off. It’s weaker and slow.”
Indeed, munis were weaker Tuesday morning, according to the Municipal Market Data scale. Yields inside six years were steady while yields outside seven years rose as much as three basis points.
On Monday, the 10-year yield finished at 1.71% for the second session, 11 basis points above its record low of 1.60% set July 26. The 30-year yield closed at 2.87% for the second session, eight basis points off its record low yield of 2.79% set July 25. The two-year was steady at 0.29% for the eighth consecutive session.
Treasuries were much weaker. The benchmark 10-year yield jumped seven basis points to 1.63% while the 30-year yield spiked up eight basis points to 2.73%. The two-year yield increased two basis points to 0.27%.
In the primary market, Bank of America Merrill Lynch is expected to price its second day of retail of $850 million of New York City Transitional Finance Authority future tax-secured bonds and subordinate bonds, rated Aa1 by Moody's Investors Service and AAA by Standard & Poor's and Fitch Ratings.
In the first day of retail on Monday, yields on the first series, $100 million of subordinate bonds, ranged from 0.48% with 2% and 4% coupons in a split 2015 maturity to 2.46% with a 2.5% coupon in 2026. Credits maturing in 2014 were offered via sealed bid. The bonds are callable at par in 2022.
Yields on the second series, $750 million of future tax-secured subordinate bonds, ranged from 0.53% with a 5% coupon in 2015 to 3% priced at par in 2032. Bonds maturing in 2013 and 2014 were offered via sealed bid. Credits maturing between 2024 and 2027 and between 2029 and 2031 were not offered for retail. The bonds are callable at par in 2022.
In the competitive market, Washington is expected to auction $788.7 million of general obligation and refunding bonds in three series – $338.7 million, $364.6 million, and $85.4 million. The bonds are rated Aa2 by Moody’s.
Minnesota is expected to issue $658.5 million of GO bonds in three pricings – $422 million, $234 million, and $2.5 million. The credit is rated Aa1 by Moody’s and AA-plus by Standard & Poor’s.