NEW YORK — A quiet municipal market Wednesday is waking up for the week’s largest new deals. While secondary market activity is subdued so far this morning, a reasonably successful California Department of Water Resources issuance priced well for retail on Tuesday, and the industry is looking forward to its institutional pricing.
In addition, the Indiana Finance Authority is expected Wednesday to price for retail more than $1 billion.
“There are a couple of new issues that are doing well right now,” a trader in California said. “Indiana is coming; it’s in a retail order period. It should be well received.”
The Municipal Market Data scale showed tax-exempt yields steady across the curve.
Munis yields dropped across most of the curve to close out Tuesday’s trading sessions. The 10-year muni yield slid three basis points to 2.23%, its lowest since Sept. 2.
The 30-year muni yield fell two basis points to 3.86%, its lowest level since Nov. 1. And the two-year muni yield stayed at 0.30%, its lowest yield in more than two years.
Treasury yields started the day slightly softer. The benchmark 10-year Treasury yield ticked up one basis point to 2.24%.
The 30-year yield also inched up one basis point to 3.68%. The two-year yield held steady at 0.20%, as it did all Tuesday, 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 scant $2.25 billion of municipal bond sales seen last week, according to industry estimates.
The industry is looking closely at two new deals to give the market some direction. Morgan Stanley Tuesday priced for retail $970.5 million California Department of Water Resources power supply revenue bonds. Institutional pricing is expected Wednesday.
“The Cal deal did well,” the trader said.
In addition, 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.
On the economic front, the Labor Department reported Wednesday that the producer price index rose 0.2% in July on a seasonally adjusted basis. That followed an unrevised 0.4% drop in June.
Core producer prices, not including food and energy, rose 0.4%. It marks the eighth consecutive increase. For June, core prices grew 0.3%.
The numbers were higher than analyst estimates. Economists polled by Thomson Reuters estimated no change in the overall number and an increase of 0.2% for the core number.
