NEW YORK – Some dealers are in the tax-exempt market early looking to sell retail bonds on the cheap, while others in the market take extended vacation and sleep off the effects of the Christmas holiday.
“There is nothing going on,” said a trader in New York. “It’s a slow start with no deals, but it looks like dealers are looking for bargains early.”
Munis were steady across the curve, according to the Municipal Market Data scale.
On Friday, the two-year yield closed flat at 0.36% for its 13th consecutive trading session. The benchmark 10-year yield held at a record low 1.91%, as recorded by MMD. The 30-year muni yield inched up one basis point to 3.63%.
Treasuries were mixed. The two-year yield rose one basis points to 0.30% in Tuesday morning trading, while the 10-year yield fell one basis points to 2.02%. The 30-year yield was flat at 3.06%.
In the primary market this week, the negotiated calendar is empty, with no deals scheduled for an expected quiet week between Christmas and New Year’s. The competitive calendar expects a paltry $5.9 million in new long-term issuance.
In the secondary market, most trades reported by the Municipal Securities Rulemaking Board Tuesday morning were flat.
A dealer bought from a customer Puerto Rico Electric Power Authority 6.124s of 2040 at 6.125%, steady from where the bonds traded a week prior.
A dealer sold to a customer Puerto Rico Commonwealth 5.2s of 2026 at 5.2%, flat from where they traded the last week.
One deal showed firming. Bonds from an interdealer trade of California 5s of 2032 yielded 4.34%, seven basis points lower than where they traded the previous week.
Muni-to-Treasury ratios finished down for the week, with the five-year and 10-year ratio closing below 100%. The five-year finished at 92.9% and the 10-year closed at 94.1% last Friday. The 30-year ratio finished down for the week, but still above 100% at 119.2%.
“Lack of new issues and strong demand are pushing munis to outperform Treasuries as the year comes to a close,” wrote Alan Schankel, managing director at Janney Capital Markets, adding “there is nothing on the horizon this week to change that calculus.”
In economic news Tuesday, the consumer confidence index surged to 64.5 in December from a downwardly revised 55.2 last month, The Conference Board said. The index was higher than the 58.3 expected by economists.
The present situation index grew to 46.7 from an unrevised 38.3, while the expectations index surged to 76.4 from a downwardly revised 66.4.
