Activity in the tax-exempt market picked up Tuesday morning as traders looked to clear out some inventory ahead of what is expected to be a big day in the primary.
Traders said there were sellers in the market, but buyers stepped up to keep the market trading steady.
"Munis are weird this morning," a New York trader said. "There are lots of people putting out bid-wanted [lists] but there are still lots of buyers." The trader added the market was trading flat.
In the primary market, Bank of America Merrill Lynch is expected to price for retail $792.4 million of Miami-Dade County, Fla., aviation revenue refunding bonds, rated A2 by Moody's Investors Service and A by Standard & Poor's and Fitch Ratings. Institutional pricing is expected Wednesday.
B of A Merrill is expected to price for retail $495.1 million of Lower Colorado River Authority refunding revenue bonds, rated A1 by Moody's and A by Standard & Poor's. Institutional pricing is expected Wednesday.
Citi is expected to sell $330 million of Cook County, Illinois, general obligation refunding bonds, rated Aa3 by Moody's, AA by Standard & Poor's, and AA-minus by Fitch.
B of A Merrill is expected to price for retail Missouri Health and Educational Facilities Authority mercy health bonds, rated Aa3 by Moody's.
In the competitive market, the University of Washington is expected to auction $279.2 million of revenue bonds, rated Aaa by Moody's and AA-plus by Standard & Poor's.
The Municipal Market Data scale continued to strengthen Monday, setting fresh record lows. The 30-year MMD yield fell two basis points to 2.52%, setting a record low. It beat the previous record of 2.54% set Nov. 16.
The 10-year yield also fell two basis points to 1.51%, hovering just one basis point above the record low of 1.50% set Nov. 16.
The two-year finished steady at 0.30% for the 41st consecutive trading session.
Yields have fallen dramatically since the beginning of the month. Over the course of November, the 10-year MMD yield has fallen 21 basis points from where it started at 1.72% while the 30-year yield has fallen 30 basis points from where it started the month at 2.82%.
Treasuries were steady in Tuesday morning trading. The benchmark 10-year yield and the 30-year yield were flat at 1.66% and 2.80%, respectively. The two-year was steady at 0.28%.
In economic news, new orders for manufactured durable goods were unchanged in October at $216.9 billion. The flat report in October comes after a 9.2% increase in September. The flat reading beat economists' expectations of a 0.1% decline.
Excluding transportation, October new orders rose 1.5% and beat economists' expectations of a 0.4% decline.
"Through the volatility this less-weak-than-expected report on durable goods orders corroborates the message of the ISM manufacturing survey that orders may be stabilizing and even picking up slightly," wrote economists at RDQ Economics. "Nonetheless, the level of underlying orders - excluding transportation - and the level of core capital goods orders remains below year-ago levels and shipments of durable goods contracted in both October and over the last three months on balance. However, given the uncertainties surrounding the resolution of the fiscal cliff, this report should be viewed as modestly encouraging news on the outlook for the factory sector."