NEW YORK — The combination of exceptionally low issuance, the coming holiday weekend, and the lingering effects of Hurricane Irene may have dropped the municipal market to the canvas at the opening bell.
As the East Coast staggers to its feet following the storm’s ravages, many market participants are still pinned to their homes by commuting difficulties, leaving firms with shrunken staffs. And customer orders aren’t expected to be too numerous, either, said a trader in New York who managed to make it into the office.
“There are just a handful of trades up on MSRB,” he said. “We’re absolutely affected [by Hurricane Irene]. We usually have 40 fixed-income guys here on the floor; Right now there are 11. With electricity down in New Jersey and nothing up in Westchester County, I think this will have an effect all day. And there’s very little supply this week.”
And with the holiday weekend coming fast, and industry pros taking Thursday and Friday off already, possible down days on Monday and Tuesday may lead to a truly lost week.
“The culmination of all those things, unfortunately, leads to the prospects of a pretty quiet slow and extremely low-volume week,” the trader said.
Lingering effects of the hurricane are expected to result in lighter trading on the morning according to Municipal Market Data analyst Daniel Berger. “For example,” he wrote in a morning research statement, “we may see longer than usual commutes for many market participants, as several large mass transit systems will delay resuming their usual schedules until Monday afternoon.”
Tax-exempt yields are slightly weaker through the middle and back ends of the curve to start the day, according to Municipal Market Data. They were steady through 2015. Securities maturing beyond 2015 were flat to one basis point higher.
Treasury yields started the week higher across the curve. The 10-year benchmark yield, after sliding 11 basis points the final two trading session last week, rose eight basis points to 2.27%.
The 30-year yield, after falling 11 basis points Thursday and Friday, jumped eight basis points to 3.62%. The two-year yield ticked up two basis points to 0.22%.
The 10-year muni yield edged up one basis point to 2.26% at Friday’s close. For the week, it rose 11 basis points from its all-time low of 2.15%.
The 30-year muni yield was unchanged at 3.88%. It rose nine basis points on the week. The two-year yield also remained at 0.30% for a 13th straight session, hovering at its lowest yield in more than 40 years.
New issuance, historically low on the week preceding Labor Day, is expected to be anemic. According to industry estimates, municipal bond sales scheduled for this week total $1.2 billion, compared to a revised $4.4 billion last week.
The competitive market holds the biggest deal this week. The New York Local Government Assistance Corp. is expected to issue $191.2 million of refunding bonds on Tuesday.
Other large deals of the week arrive in the negotiated market. Tampa, Fla., is expected to issue $128.9 million of water and sewer systems improvement and refunding revenue bonds. Tampa is expected to hold a retail order period on Tuesday, followed by institutional pricing Wednesday.
Bank of America Merrill Lynch is expected to price $110 million of San Diego County Water Authority revenue bonds for retail on Tuesday and institutional investors Wednesday.
