NEW YORK — Light issuance has helped the municipal market rally carry into Thursday afternoon, while Treasury yields continue to dive ever deeper.
Muni buyers have shown reasonable interest in the middle- and longer-range of the yield curve, a trader in New York said.
“Retail is not busily buying,” he said. “But we’re seeing buying in the Street. We’re definitely richer in the middle range and on the longer end. Paper supply is still a massive factor here; not a lot of paper.”
Muni yields continue their streak, though at a slower pace than Treasuries, according to the Municipal Market Data triple-A curve. Maturities out to two years were unchanged. Those from 2014 to 2019 were three to five basis points lower.
At the nine-24-year mark, they are four to nine basis points firmer. Beyond 2035, they are four to six basis points lower.
The benchmark 10-year muni yield finished Wednesday at 2.45%, its lowest yield since late October. Its yield has now dropped 18 basis points since Monday.
The 30-year muni yield ended at 4.05%, its lowest since early November. Its yield has dropped 25 basis points since Thursday.
The two-year muni yield fell another two basis points to 0.36%, its lowest yield since Sept. 1, 2010.
By noon on Thursday, Treasury yields rallied hard. The 10-year Treasury yield plunged 13 basis points to 2.48%, its lowest level since Oct. 13. In mid-April it yielded at much as 3.59%, or 111 basis points more than at noon.
The 30-year yield, after dropping an incredible 21 basis points since Tuesday, fell another 14 basis points heading into the afternoon to 3.75%, its nadir since Oct. 8.
The two-year Treasury yield, meanwhile, reached a record low when it dropped five basis points to 0.28%.
“We keep getting richer, and the Treasury rally adds to the fire,” the trader said. “Supply is the name of our game right now.”
Just $3.25 billion in new supply is expected this week after issuers decided to exercise caution against borrowing during a volatile period. But prices showed that those issuers who took chances in the market thus far have gotten a really good deal.
Bank of America Merrill Lynch paced the negotiated market Thursday as it priced $347.2 million of Port of Oakland refunding revenue bonds. The bonds are rated A2 by Moody’s Investors Service, A by Standard & Poor’s and A-plus by Fitch Ratings.
Yields range from 1.24% with coupons of 1.50% and 4.00% in a split maturity in 2013 to 5.20% with a 5.125% in 2031. Debt maturing in 2012 was offered in a sealed bid.
Investors and traders with growing concerns about the economy have taken a huge chunk out of the equities market so far Thursday. The major stock market indexes were down by at least 2.63% entering the afternoon, with the Nasdaq leading the way with a plunge of 2.84%. The Dow Jones Industrial Average has gotten walloped, and is down 313.26 points, thus far.
