The tax-exempt market continued to weaken Wednesday morning as traders said even though the market gets cheaper every day, buyers are in no rush to start participating.
"The market gets cheaper every time," a New Jersey trader said. "There is a bid but no one wants to hit the bid because the bid-ask spread is so wide."
In the primary market, deals have seen concession, but this trader said prices are still too high, especially compared to secondary levels. "I don't like the new issues. They aren't cheap enough yet. I thought they would be cheaper."
Buyers are also hesitant to put money to work until muni bond fund outflows pick up. "Clients are slowly trickling out of funds but when the news hits mass media, those funds will see huge redemptions. We haven't had that yet."
In the primary market Wednesday, Loop Capital Markets is expected to price for institutions $800 million New York City Transitional Finance Authority future tax secured subordinate bonds. The TFA bonds are rated Aa1 by Moody's Investors Service and triple-A by Standard & Poor's and Fitch Ratings.
In the second retail pricing Tuesday, yields ranged from 0.63% with 3% and 4% coupons in a split 2016 maturity to 4.15% with a 4% coupon in 2043. Credits maturing in 2015 were offered in a sealed bid. Bonds maturing in 2030, 2031, 2032, 2038, and 2042 were not offered for retail. The bonds are callable at par in 2023.
Yields were raised as much as 10 basis points from the first retail pricing.
Morgan Stanley is expected to price $600 million Wisconsin Health & Educational Facilities Authority bonds on behalf of Ascension Health Alliance. The bonds are rated Aa2 by Moody's and AA-plus by Standard & Poor's and Fitch.
Bank of America Merrill Lynch is expected to price for institutions $500 million Massachusetts School Building Authority senior dedicated sales tax bonds, rated Aa2 by Moody's and AA-plus by Standard & Poor's and Fitch.
In retail pricing Tuesday, yields ranged from 0.68% with a 4% coupon in 2016 to 4.10% with a 4% coupon in 2038. Bonds maturing in 2031, 2032, 2044, 2038, and 2043 were not offered for retail. The bonds are callable at par in 2023.
In the competitive market, San Francisco is expected to auction $232.6 million of general obligation bonds, rated Aa1 by Moody's and AA by Standard & Poor's.
On Tuesday, yields on the Municipal Market Data scale ended as much as eight basis points higher. The triple-A 10-year yield rose seven basis points to 2.26% and the 30-year yield jumped eight basis points to 3.49%. The two-year was unchanged at 0.30% for the seventh session.
Muni yields on the Municipal Market Advisors 5% scale closed out as much as eight basis points higher. The 10-year yield climbed five basis points to 2.30% and the 30-year yield jumped six basis points to 3.57%. The two-year ticked up one basis point to 0.38%.
Treasuries were weaker Wednesday morning after a stronger session Tuesday. The benchmark 10-year and 30-year yields rose two basis points each to 2.21% and 3.35%, respectively. The two-year was steady at 0.33%.