The tax-exempt market continued to see light trading Monday afternoon as traders waited for primary supply to price later in the week.

"Mondays are setting the table for the rest of the week," a Chicago trader said. "The calendar is light and of the calendar, a lot is taxable. So there are some residual balances from new loans last week that will be picked at but overall it feels like the dealer community is medium to light in inventory. I am not seeing a lot of bonds offered from trading accounts."

He continued that munis are trading sideways today. "Treasuries are a smidge softer and that's giving people pause. The technicals are somewhat modest but we will see some flows this week."

He added that Treasuries outperformed last week, pushing muni-to-Treasury ratios higher. "Those moves took ratios to levels where a lot of bonds were put away."

The primary market isn't expected to pick up until Tuesday with an estimated $5.42 billion expected to be sold this week.

On Friday, municipal bond market scales ended stronger.

Yields on the Municipal Market Data triple-A GO scale ended as much as three basis points lower. The 10-year yield plunged three basis points to 1.78% while the 30-year yield dropped one basis point to 2.90%. The two-year closed at 0.31% for the ninth straight session.

Yields on the Municipal Market Advisors 5% coupon triple-A benchmark scale closed as much as one basis point lower. The 10-year and the 30-year yield fell one basis point each to 1.82% and 2.98%, respectively. The two-year was steady at 0.33% for the fourth session.

The Treasury yield curve steepened Monday afternoon. The two-year yield fell one basis point to 0.24%. The benchmark 10-year yield jumped three basis points to 1.88% while the 30-year yield rose one basis point to 3.08%.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.