NEW YORK – Activity in the tax-exempt market is picking up Tuesday as dealers are focused on new pricings in the primary market and secondary trading activity is firmer.
“Secondary trading has picked up a little from yesterday,” a New York trader said. “Yesterday was pretty quiet across the board. There are some offerings out there but I haven’t seen too much execution.”
He added most of the larger dealers seem to be preoccupied with the primary calendar. “There is larger issuance that is coming out today,” he said. “I heard the Dormitory Authority of the State of New York deal is going well. And that seems to be the focus.”
Munis were firmer early Tuesday afternoon, according to the Municipal Market Data scale. Yields inside three years were steady while the four-year yield fell as much as two basis points. The five-year yield was steady while yield outside six years declined as much as two basis points.
On Monday, yields finished flat. The 10-year muni yield finished steady at 1.83% while the 30-year yield closed at 3.26%. For the fifth consecutive trading session, the two-year held steady at 0.29%, the record low set last Tuesday.
Treasuries gained through Tuesday afternoon. The benchmark 10-year yield and the 30-year yield fell four basis points each to 1.94% and 3.08%, respectively. The two-year was steady at 0.30%.
In the primary market, Citi priced for retail $830 million of DASNY third general resolution revenue state university bonds, rated AA-minus by Standard & Poor’s and Fitch Ratings. Details were not available.
Bank of America Merrill Lynch priced for retail $290 million of Virginia Commonwealth Transportation Board Garvees, rated Aa1 by Moody’s Investors Service and AA by Standard & Poor’s. Pricing information was not available.
In the secondary market, trades reported by the Municipal Securities Rulemaking Board showed firming.
A dealer sold to a customer Municipal Electric Authority 6.637s of 2057 at 5.53%, 10 basis points lower than where they traded last Thursday.
A dealer bought from a customer Tobacco Securitization Authority of Southern California 5.125s of 2046 at 7.65%, eight basis points lower than where they traded Friday.
A dealer sold to a customer Illinois 5.1s of 2033 at 5.46%, five basis points lower than where they traded Thursday.
A dealer purchased from a customer Triborough Bridge and Tunnel Authority 5s of 2025 at 2.43%, three basis points lower than where they traded Friday.
Since the most recent rally began last Friday, muni-to-Treasury ratios have increased on the long end as munis underperformed Treasuries and became cheaper. The 10-year muni-to-Treasury ratio rose to 92% from 91.7% last Thursday. The 30-year ratio increased slightly to 103.8% from 103.1%.
Muni-to-Treasury ratios on the short end fell as munis outperformed Treasuries. The five-year ratio fell to 78.6% from 79.1% on Thursday.