NEW YORK — The municipal market geared up for a week of more deals in the primary market, persistently low rates and attractive ratios along the yield curve. But it’s too early for trading in the secondary to give any real direction, a trader in Florida said.
“Some of the trades that have taken place so far are truly not directional toward a move in rates one way or the other,” he said. “We’re seeing a couple of bid sides in some of last week’s deals, cleaning up some of the residual balances.”
At press time, the Municipal Market Data scale read had not been updated. Last week, tax-exempt yields ended narrowly mixed throughout the curve.
Last week ended with benchmark yields unchanged, and with munis largely keeping the gains they had made during the week. The 10-year muni yield held steady at 2.26%, its lowest yield since Sept. 3.
The two-year muni yield remained unchanged 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.
Treasuries started the day mostly softer along the curve after a week of dramatic leaps and dives. The benchmark 10-year Treasury yield rose two basis points to 2.26%.
The 30-year yield increased three basis points to 3.74%.
The two-year yield opened steady at 0.19%, one basis point above its all-time low.
The primary market last week had little gas to fuel the market. But this week should be different: there are expectations of a boost in volume to, at least, June levels. The industry expects $5.28 billion of deals this week, up from the measly $2.25 billion of municipal bond sales expected for last week.
But, the increase isn’t significant, according to the trader. “There are no large [competitive] loans that would give the marketplace any type of guidance or leadership,” he said.
Morgan Stanley is expected to head up the two largest deals, both negotiated bids. It expects 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 next day.
The firm is also prepared to price $980 million of California Department of Water Resources power supply revenue bonds. Retail investors should have a crack at them on Tuesday, with institutional investors expected to have their shot on Wednesday.
But the trader said that outside of these two deals, the calendar is rather thin.
On the competitive side of the market, Kentucky’s Louisville and Jefferson County Metropolitan Sewer District is expected to issue $267 million of refunding bonds on Wednesday.
The equities markets started the morning strong, with the major indexes all up at least 1.41% from Friday’s close. The Dow Jones Industrial Average has climbed 158.52 points.
