Deals scheduled to come to market during the shortened four-day week following Memorial Day may be priced cheaper, market participants said.
A trader in New Jersey said many investors take off the rest of the week and there may not be enough people around to purchase the bonds.
"[Deals] may have to be somewhat cheaper if there is a sense there is not enough people around," he said. "That's the big obstacle."
A trader on the West Coast said the biggest issue this week will be making sure investors come to work and predicted the low trading volume from last week will continue through this week. Janney Capital Markets said in a report released on Tuesday, Friday shortened session resulted in the lowest trading volume in a day since January.
A trader in New York also pointed to the mild sell-off last week which he anticipates will continue this week. He said issuers may find they have to cut prices to move product, since credit spreads on deals coming to market have been so tight recently many investors have chosen to sit on their cash.
Yields for bonds maturing in one year and in four to 30 years held steady on Tuesday, according to Municipal Market Data's triple-A scale. Yields for bonds maturing in two to three years fell as much as one basis point.
The trader in New York mentioned that rising interest rates will impair issuers' ability to get deals done.
"There had been an overall short-term trend of seeing interest rates rise slightly in munis, and this will put some pressure on ability for deals to get spreads issuers would have gotten three weeks ago in marketplace," he said.
Treasuries were steady Tuesday afternoon, with the 10-year benchmark and the two-year note remaining at 2.53% and 0.36%, respectively, from Friday's market close. The 30-year yields fell two basis points to 3.38%.
