NEW YORK – Nervous eyes focused on Europe and the outcome of the EU summit as muni and Treasury yields fell across the curve Tuesday.
A California trader said that while there are a few interesting deals in the market, trading is light. “Everyone wants to see what the outcome will be of the EU summit and if there will be a resolution,” he said. “There is still a little fear and the bond market is waiting to see if there is a resolution. That’s why trading is light.”
While investors are nervous, “issues are being put away and there is good pricing,” the trader said.
“MMD is adjusting a lot in the middle,” he added. “It is off 46 basis points and we came back in the belly of the curve. So people are feeling these rates a little more than they were before.”
Muni yields continued to firm from the middle of the curve on out during Tuesday afternoon trading, according to the Municipal Market Data scale. Yields before 2029 were steady, while yields rose after 2030.
In Monday’s session, the benchmark 10-year muni yield closed at 2.43%. It remained 46 basis points above the record low it held on Sept. 23. The two-year yield held steady at 0.45% for the eighth consecutive trading session. The 30-year finished Monday at 3.72%.
In Tuesday afternoon trading, the Treasury curve was flattening as yields on the long end fell. The 10-year and 30-year Treasury yield each dropped seven basis points to 2.17% and 3.20%, respectively. The two-year held steady at 0.29%.
In the primary market, competitive issues did well. Barclays Capital won the $193.8 million Howard County deal, and MMD analyst Randy Smolik noted it came “tight to MMD implied spots and has seen very good follow-through.”
Bank of America Merrill Lynch won the $300 million Illinois issue. Yields ranged from 2.70% with a 3.00% coupon in 2018 to 3.85% with a 3.75% coupon in 2025. Credits maturing in 2013 to 2036 were sold but not available.
In the negotiated market, Barclays priced $439.6 million of California economic recovering refunding bonds rated Aa3 by Moody’s and A-plus by Standard & Poor’s and Fitch. Yields ranged from 1.13% with a 4.00% coupon in 2016 to 1.25% with a 4.00% coupon in 2017.
Bank of America Merrill Lynch priced $284.1 million of Michigan Finance Authority state revolving fund revenue bonds in two series. The bonds are rated AAA by Standard & Poor’s and Fitch.
Yields on the first series, $227.8 million of Series 2011 clean water revolving fund revenue refunding bonds, ranged from 0.55% with a 5.00% coupon in 2013 to 3.21% with a 5.00% coupon in 2024. Credits maturing in 2012 were offered via sealed bid.
Yields on the second series, $56.3 million of Series 2011 drinking water revolving fund revenue refunding bonds, ranged from 0.55% with a 2.00% coupon in 2013 to 3.21% with a 3.00% coupon in 2024. Credits maturing in 2012 were offered via sealed bid.
