NEW YORK — Even the odd-lot bid-wanteds have disappeared. As Thursday’s trading session pushes into the afternoon, even that stalwart branch of customer orders has dried up.
A few weeks ago they were plentiful, as was interest in the municipal market, in general, a trader in California said. But market participants, who were glad to see the back of an otherwise difficult month, have begun to let their exhaustion show. Trading desks are beginning to thin out as the market barrels toward the holiday weekend.
“No one cares to work today, or yesterday, or the whole week, it feels,” the trader said. “The secondary is very, very dry. Prior to this, from weeks ago, there were lots of odd-lot bid-wanteds, but even that has dried up. As a consequence, the bid side is much stronger, just because there’s no paper out there.”
Falling Treasury yields haven’t had much of an impact on munis, so far. And they’re likely not to, according to Municipal Market Data analyst Randy Smolik. “Munis have shown little reaction to the chop in Treasuries this week, which makes one suspect its reaction to Treasuries today could be mute,” he wrote in a mid-morning research post.
The Municipal Market Data scale had yet to update tax-exempt yields by press time. They were mostly steady across the curve to start the day.
The benchmark 10-year yield on Wednesday ticked down one basis point to 2.25%. The 30-year yield remained unchanged at 3.89%.
The two-year yield held fast at 0.30% for a 16th straight session, hovering at its lowest level in more than 40 years.
Treasury yields started the morning firmer, and have continued down that path as the day advances. The 10-year benchmark yield has fallen six basis points to 2.18%.
The 30-year yield has lost seven basis points and stands at 3.54%. The two-year yield has slipped two basis points to 0.19%.
Mostly everyone in the market says that these yields are far too low, the trader said. But they keep buying the bonds, regardless.
But investors aren’t buying bonds looking for another market pop, he added. They’re buying them because they’re light on inventory or they still have some customer inquiries.
“There are definitely some guys sitting on a lot of cash, and they want to spend some of it,” he said. “We’ve got guys begging us for short paper, and we just can’t find it.”
At this point in the week, new issuance is likely finished. And while typically low the week preceding Labor Day, this week has been disappointing, though not surprising.
According to industry estimates, municipal bond sales for this week should total a paltry $1.2 billion, compared to a revised $4.4 billion last week. No new issuance of any significance is expected to hit the primary market the rest of the week.
