NEW YORK – The municipal market appears to be digesting new issues fairly well as buyers eat up supply as the year-end approaches.
“You have the end of the year positioning,” said a trader in New Jersey. “People seem to have bonds and they are looking to possibly add to positions.” He said buyers will go into January “relatively heavy if they can.”
He added the market is digesting new issues pretty well and all in all, “the market is fine.”
“Yield is still king,” he added. “If there is more yield with decent credit, there are people on the bid side.
The Municipal Market Data scale was not updated by press time. On Friday, the two-year muni yield closed flat at 0.36% for its third consecutive trading session, while the 10-year remained at 1.97%. The 30-year muni yield held its ground at 3.69%.
Treasuries were rallying in Monday morning trading as yields fell across the curve. The benchmark 10-year yield and the 30-year yield fell six basis points each to 2.01% and 3.05%, respectively.
In the primary market, issuance is expected to remain fairly robust this week. The market can expect $5.69 billion, with $4.09 billion in negotiated and $1.6 billion in competitive deals.
Muni-to-Treasury ratios are also stealing headlines this week. On Friday, the five-year muni-to Treasury ratio closed at 106.7%, well off its three-month high of 136.8%, but still not yet at its three-month low of 95.8%. The 30-year ratio closed at 118.6%, diving close to its three-month low of 110.1%.
Ratios fell last week from “buying like crazy” on top of “huge volume” a trader in New York said.
The 10-year muni-to-Treasury ratio hit its three-month low, closing at 95.6%. The 10-year muni-to-Treasury ratio average for the year is about 97%. “The backup in the Treasury markets on Friday quiets the impulse for crossover buying to add to the demand component,” wrote MMD’s Daniel Berger. “Yet, ratios have not fallen to the point where crossover sellers are likely to surface.”
