Market Post: Muni Bid Carries into Tuesday Morning

The tax-exempt market continues to reflect a firmer tone early in Tuesday's session.

Investors flush with cash see a manageable calendar this week and persistent trouble in Europe. Muni yields have trickled down to the intermediate and long ends of the curve.

A lot of July reinvestment money continues to float into the market. But there's not a whole lot to spend it on, adding to the overall firmness of the market, a trader in New York said.

"There's a little better tone this morning; the Street's not heavy," he said. "Customers have money. There's not a big calendar this week, so there's an opportunity for the Street to catch a bid, which it has. It started last week. Despite the holiday week, it was a pretty decent tone. It's carried into this week."

Tax-exempt yields continue to firm Tuesday across all but the front end of the curve, according to the Municipal Market Data scale. As with Monday, they were steady through two years. Yields from three to 10 years are flat to two basis points lower. Beyond 10 years, they are down one to three basis points.

The benchmark 10-year triple-A yield slipped two basis points in Monday's session to 1.80%. The 30-year fell three basis points on the day 3.09%. The two-year started the week at 0.32%, holding for the 26th straight session.

Treasury yields started the morning flat to slightly weaker. The benchmark 10-year yield is steady at 1.52%.

The 30-year yield has ticked up one basis point to 2.63%. The two-year has also inched up one basis point to 0.28%.

Muni supply is expected to attain pre-Independence Day levels this week, after recording particularly feeble issuance numbers last week due to the holiday falling mid-week.

Industry estimates predict $7.07 billion should reach the market. That compares with a meager $105.7 million of volume during the holiday week.

Several larger deals should arrive Tuesday, including the week's biggest in the competitive market. Triple-A-rated Columbus, Ohio, is expected to auction $447 million of various purpose unlimited-tax bonds.

Bank of America Merrill Lynch is expected to price $317.3 million of Central Puget Sound Regional Transit Authority sales tax and motor vehicle excise tax refunding bonds and sales tax refunding bonds, in two series. B of A Merrill held the retail order period Monday.

Also, JPMorgan is expected to price for retail the New York City TFA building and revenue bonds. The bonds are expected Thursday.

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