NEW YORK — Municipal bond participants have set their sights on this week’s expected supply, and how the market is going to handle it.
The secondary has seen a couple of trades, but mostly there has been little follow-through, a trader in New York said. Yields appear slightly firmer, but not necessarily attractive, he added. But the feeling in the general market is that the week’s expected supply will have to be pretty attractive for deals to get done, he said.
“We saw that supply was somewhat challenging for the market last week, and we have more of it this week,” he said. “If Treasuries hang in here, you’ll get the deals done, but I don’t think it’s going to be at the tightest of levels. I think you’re going to have to give buyers somewhat of a concession.”
Given the cross currents in Europe, and specifically talk of Greece missing a target for budget deficit cuts, Treasuries have started the week with a good tone. They are supplying tailwinds, the trader added. But the muni primary market will need them to last.
At press time, tax-exempt yields had yet to be updated. They were mixed across the curve Friday, according to the Municipal Market Data scale.
They were steady through six years, and between 14 and 22 years. Between seven and 13 years, they increased one or two basis points. And yields beyond 22 years inched down one basis point.
The 10-year muni yield ticked up one basis point Friday to 2.22%. The 30-year yield slipped one basis point on the day to 3.55%. The two-year yield held for a third session at 0.34%.
Treasury yields have started the week on Friday’s trajectory of firming for those in the intermediate and long-term range. The benchmark 10-year Treasury yield has skipped down three basis points to 1.88%.
The 30-year yield has fallen six basis points to 2.84%. The two-year yield has held steady at 0.26%.
It also appears as though more new issuance is on the way. The market expects a boost this week to the tune of an anticipated $8.26 billion. Last week, the market saw a revised $7.69 billion in new supply.
The week’s largest new deals in the negotiated market start with $625 million Lower Colorado River Authority, Texas, transmission contract refunding and improvement revenue bonds, to be priced by Morgan Stanley. The retail order period is expected Tuesday, with institutional pricing on Wednesday.
Morgan Stanley is also expected to price $615 million of New York’s Triborough Bridge and Tunnel Authority general revenue refunding bonds. The retail order period is expected to take place on Monday, with institutional pricing anticipated for Tuesday.
Citi is expected to price $600 million Palm Beach County, Fla., Solid Waste Authority refunding revenue bonds.
On the competitive side, the Dormitory Authority of the State of New York is expected to sell $515 million of revenue bonds in two bids, one for $467 million and another for $48 million. The bonds are scheduled to come to market Tuesday.
