Municipal bond traders eyed the largest deal of the week, $1.2 billion Iowa Finance Authority bonds, Tuesday morning.
Citi is expected to price the Midwestern disaster area revenue bonds for the Iowa Fertilizer Company Project. The bonds are rated BB-minus by Standard & Poor's and Fitch Ratings.
Initial price talk showed bonds maturing in 2025 yielding 346 basis points above the Municipal Market Data scale.
"It seems cheap to me," a Chicago trader said. "And these will have liquidity." This trader added the market was quiet outside the major deal.
In the rest of the primary market Tuesday, Bank of America Merrill Lynch is expected to price $225.7 million of El Paso County Hospital District combination tax and revenue certificates of obligation and general obligation refunding bonds. The credit is rated AA-minus by Standard & Poor's and AA by Fitch.
B of A Merrill should also price $175.7 million of Board of Trustees of Michigan State University general revenue bonds, rated Aa1 by Moody's Investors Service and AA by Standard & Poor's.
Municipal bond scales ended flat Monday after posting gains Friday on a risk-off rally.
Yields on the Municipal Market Data 5% triple-A GO scale ended steady across the curve. The 10-year and 30-year yields closed unchanged for the second trading session at 1.69% and 2.87%, respectively. The two-year closed steady at 0.29% for the 17th session.
Yields on the Municipal Market Advisors 5% scale also ended flat across the curve. The 10-year and 30-year yields finished unchanged at 1.75% and 3.00%, respectively. The two-year was flat at 0.32% for the 17th session.
Treasuries were stronger Tuesday after finishing mostly flat Monday. The benchmark 10-year and 30-year yields fell two basis points each to 1.65% and 2.86%, respectively. The two-year was steady at 0.22%.