NEW YORK — New issuance is expected to be up this week, and the municipal market is anxious to see how it will be absorbed. As it arrives, secondary trading should take a back seat to the primary, traders say.
“It looks like a little slip-sliding, depending on the new issue,” a trader in Chicago said. “That’s going to dominate price. The secondary may be a little easier to make room for that.”
Yields in both the muni and Treasury markets have been sitting around record low levels for the past several trading sessions. And though muni yields are extremely low, ratios have been very favorable for drawing crossover buyers into the tax-exempt space.
Tax-exempts yields are so far steady across the curve, according to the Municipal Market Data scale.
“The front of the curve’s OK,” the trader said. “If there’s going to be some weakness, it’ll be in 7-years-on-out.”
The benchmark 10-year yield Monday held at a record low of 2.07%, as measured by MMD.
The 30-year yield remained unchanged at 3.66%, its lowest level in at least three decades. The two-year yield stayed at 0.30% for a 23rd consecutive session, hovering at its lowest level in more than 40 years.
Treasury yields started the day mixed, though mostly weaker. The 10-year benchmark yield increased two basis points to 1.97%, roughly five basis points above last week’s low, but still in a range it hasn’t seen in roughly five decades.
The 30-year yield rose two basis points to 3.27%. The two-year yield inched down one basis point to 0.21%.
Volume in the primary appears to be increasing gradually from last week’s trifling level. Industry estimates place new issuance for this week at $4.65 billion, not including $5.4 billion of California revenue anticipation notes. Estimates for last week’s volume were revised downward to $1.95 billion.
“This is a large supply, which means we have to see how we can accept all of this,” the trader said. “The secondary’s probably going to be a little weaker. We’ll have to see where the primary comes in.”
