NEW YORK — Following a quiet morning, a slightly improved municipal market Tuesday is reacting to struggling equities and uncertainty in Europe.
Into the mix, $971 million of California Department of Water Resources power supply revenue bonds hit the market. By the close of Tuesday’s session, the industry will try to gauge the market’s direction from retail interest in the deal.
Heading into the afternoon, institutional investors are buoying the market, a trader in Chicago said. “Today, the market is decent,” he said. “The bid side is improving just a bit right now. People are feeling better about things now that the stock market is getting hit.”
Tax-exempt yields are mixed throughout the curve heading into the afternoon, according to the Municipal Market Data scale. Yields for debt maturing from 2013 to 2016, from 2024 to 2027, and after 2034 are steady.
Maturities in 2018 to 2023 are flat to two basis points lower. And those maturing in 2028 to 2034 are flat to one basis point higher.
Munis started this week much as they ended last week: unchanged. The 10-year muni yield held steady at 2.26%, for a fourth straight session, its lowest yield since Sept. 3.
The two-year muni yield stayed at 0.30%, its lowest yield in more than two years. And the 30-year muni yield was steady at 3.88%, still its lowest level since Nov. 2.
Treasury yields have mostly firmed today. The benchmark 10-year Treasury yield fell three basis points to 2.27%. The 30-year yield dropped six basis points to 3.71%. The two-year yield has so far held steady at 0.20%, two basis points above its all-time low.
The amount of new issuance this week is expected to more than double last week’s total. Volume should rise to around $5.28 billion from the meager $2.25 billion of municipal bond sales seen last week, according to industry estimates.
The industry is focusing on two new deals. Morgan Stanley Tuesday priced for retail $970.5 million California Department of Water Resources power supply revenue bonds. The bonds are rated Aa3 by Moody’s Investors Service, AA-minus by Standard & Poor’s and AA by Fitch Ratings.
Yields range from 0.40% with a 3.00% coupon in 2013 to 2.66% with a 5.00% coupon in 2021. Maturities are split for debt in 2013, 2015, 2018, 2020, and 2021. There is one maturity in 2019.
At press time, about $845.6 million of the total was still available. Institutions are expected to be able to participate on Wednesday.
Also on tap, Morgan Stanley is expected to price more than $1 billion of Indiana Finance Authority wastewater utility revenue bonds. The bonds should be priced for retail on Wednesday, and for institutions the following day.
Crossing noon, the stock market indexes are all down from Monday’s close by at least 1.25%. The Dow Jones Industrial Average is down almost 144 points.
