With little new issuance in the primary, buyers looked to the secondary market Tuesday morning, buying bonds from a large bid list Vanguard put out early in the morning.
Bid lists that surfaced got strong bids, traders said, because there is not enough in the primary to get buyers excited. "That had some size and got some real interest generated, but if you don't have something like that, there's not a whole lot around," a Los Angeles trader said.
There is some uncertainty in the fixed-income market with the first day of the government shutdown, and the debt ceiling and tapering by the Fed looming in the near future. "With the shutdown you can quantify what the effects will be because this has happened before," this trader said. "But with the debt ceiling fight, we are potentially moving into unchartered territory. It's very difficult to see how this ends."
Dealers are light due to little issuance, and that is leaving room for all opinions in the market, traders said. "Do we see a flight to quality paper or people running away? No one is heavy because there's not a lot of supply. So you can put stuff out and get lighter or you can buy what's being put out there. There is room for everyone's opinion."
In the primary market Tuesday, Siebert Brandford Shank & Co. priced for retail $463 million of California State Public Works Board lease revenue bonds, followed by institutional pricing Wednesday. The deal includes two series for correctional facilities projects rated A2 by Moody's Investors Service and A-minus by Standard & Poor's and Fitch Ratings, as well as one series for various projects at the California State University rated Aa3 by Moody's and A-minus by Standard & Poor's and Fitch.
Yields on the first series of $135.8 million ranged from 0.51% with a 1% coupon in 2015 to 4.70% with a 4.625% coupon in 2033. Bonds maturing in 2014 were offered via sealed bid. Bonds maturing between 2029 and 2032 were not offered for retail. The bonds are callable at par in 2023.
Yields on the second series of $163.5 million ranged from 0.51% with a 5% coupon in 2015 to 4.15% with a 5% coupon in 2028. Bonds maturing in 2014 were offered via sealed bid and portions of bonds maturing between 2026 and 2033 were not offered for retail. The bonds are callable at par in 2023.
Yields on the third series of $163.7 million ranged from 0.80% with a 5% coupon in 2016 to 4.60% with a 4.5% coupon in 2033. Portions of bonds maturing between 2026 and 2038 were not offered for retail. The bonds are callable at par in 2023.
On Monday, yields on the triple-A Municipal Market Data scale ended steady to one basis point higher. The two-year was steady at 0.36% for the seventh consecutive session and the 10-year closed unchanged at 2.54% for the fourth session. The 30-year yield increased one basis point to 4.12%.
Yields on the Municipal Market Advisors scale also ended steady to one basis point higher on Monday. The two-year was steady at 0.54% for the eighth consecutive trading session and the 10-year closed flat at 2.70% for the third session. The 30-year yield increased one basis point to 4.26%.
Treasury yields were slightly higher. The benchmark 10-year yield increased three basis points to 2.65% and the 30-year yield rose two basis points to 3.72%. The two-year was steady at 0.34%.