NEW YORK — A weakening in Treasury yields late Tuesday morning has enticed market participants in from the sidelines, creating a more active municipal secondary.
“Guys have been sitting on cash,” a trader in New York said. “A couple of them got forced in a little bit today. You’ve had such a strong move in Treasuries, it’s hard to sit on the sidelines if you’re sitting on cash.”
In addition, muni-Treasury ratios, after Treasuries outperformed munis over the past couple of days, are more favorable, the trader added.
“The long end is back around 103.5%; the 10-year’s around 92.8%,” he said. “That’s fairly attractive. That brings in some buyers.”
Muni yields are firmer with momentum across the curve Tuesday, particularly around the belly, according to the Municipal Market Data scale. They are flat to two basis points firmer for maturities in 2013 and 2014.
Yields are two to four basis points lower for bonds maturing in 2015. But for those maturing in 2016 and 2018, they’re as much as six basis points firmer. And for bonds maturing in 2018, they’re as much as seven basis points lower.
For debt maturing from 2019 through 2036 they are two to five basis points lower. Yields for the long end of the curve have fallen one to three basis points.
The benchmark 10-year muni yield fell four basis points Monday to 2.70%. It stands 28 basis points beneath its average for 2011.
The 30-year yield lost three basis points, falling to 4.34%, or 28 basis points under its average for the year. The two-year yield was unchanged at 0.42% for the 20th straight session, hovering 18 basis points below its average for 2011.
Treasury yields started the morning mostly lower, but rebounded around noon. The 10-year yield rose one basis point to 2.93%, still well below 3.00%.
The 30-year yield fell one basis point to 4.20%. The two-year yield inched up two basis points to 0.39%.
Market participants welcome the healthy new issuance. Muni bonds expected to be sold this week are total $5.3 billion, against a revised $878.4 million last week.
All new issuance that’s reached the market this week has been well received, the trader said.
Wells Fargo led Tuesday’s offerings with the largest new deal so far this week. It priced for retail $718.2 million of Dormitory Authority of the State of New York personal income tax revenue bonds.
The bonds are rated triple-A by Standard & Poor’s and double-A by Fitch Ratings. Yields range from 0.87% with a 4.00% coupon in 2014 to 4.29% with a 4.25% coupon in 2031. Credits maturing between 2022 and 2025, 2027 and 2030, and in 2041 are not offered for retail.
