NEW YORK – Buyers are at it again. After demand pushed the 10-year and 30-year muni yields to new record lows Tuesday, buyers are continuing the momentum Wednesday.
“Customers and dealers are buying everything, again,” said a trader in New York. “There are not many bonds left.”
“Who’s not buying – that is the question,” he added, referring to the different market participants who are jumping in to get a piece of the action.
Munis were steadying further on Wednesday morning, according to the Municipal Market Data scale. Yields inside the seven-year were flat, but yields on the eight-year to 10-year fell one basis point and yields on the 11-year to 13-year fell two basis points. Outside the 14-year maturity, yields fell three and four basis points.
On Tuesday, the two-year yield held steady at 0.40%. The 10-year yield closed down one basis point to 1.82%, beating the previous record of 1.83% as recorded by MMD on Dec. 30. The 30-year dropped five basis points to 3.40%, beating the previous record of 3.44% as recorded by MMD on Sept. 23.
Treasuries rallied. The two-year yield fell one basis point to 0.24%. The benchmark 10-year and the 30-year yields fell five basis points each to 1.93% and 2.99%, respectively.
In the primary market, the two biggest deals on the negotiated calendar are expected to come to market.
Morgan Stanley is expected to price $240 million of Orange County, Calif., taxable pension obligation bonds, rated Aa2 by Moody’s Investors Service and A-plus by Standard & Poor’s.
Bank of America Merrill Lynch is expected to price $181 million of North Carolina grant anticipation revenue vehicle bonds. The credit is rated Aa2 by Moody’s, AA by Standard & Poor’s and AA-minus by Fitch Ratings.
On the competitive calendar, Illinois is expected to auction $800 million of general obligation bonds in two pricings – a $525 million tax-exempt deal and $275 million in taxable bonds.
The deals come after Moody’s downgraded $27 billion of Illinois GOs to A2 from A1 and gave it a stable outlook. Illinois is now the lowest rated state by Moody’s. Standard & Poor’s kept the state’s A-plus rating and negative outlook while Fitch kept its A rating and stable outlook.
Earlier this week, John Sinsheimer, director of capital markets for Illinois said “In the last 12 months, we have paid off a significant amount of Illinois debt so we believe there’s appetite out there for the name.”
Also early in the week, Judy Baar Topinka, state comptroller for Illinois, added “I want to make clear that there is no fear of the state missing a bond payment.”
The Colorado Metro Wastewater Reclamation District is expected to auction $380 million of revenue bonds.
