NEW YORK – Tax-exempt market participants were out early Tuesday morning as traders looked to buy bonds in the new year.
“There is buying out of the chute,” said a trader in New York. “Even though short-term muni-to-Treasury ratio are now approaching rich levels, there are buyers still out. And they are buying.”
The Municipal Market Data scale was not updated by press time. But last week, munis broke records.
On Friday, the 10-year muni yield fell three basis points to 1.83%, to set a record low as recorded by MMD. Friday’s record broke the previous record of 1.86% set Thursday, which broke the record of 1.87% set Wednesday. The prior record, 1.91%, was set the week before Christmas.
The 30-year tax-exempt yield closed down one basis point at 3.55%. The two-year yield held steady at 0.36% for its 17th consecutive trading session.
In the primary market this week, the municipal market can expect $543 million in new issuance, down from last week’s revised $3.95 billion. Roughly $323.3 million in negotiated deals are expected, down from last week’s revised $3.6 billion, which includes the Michigan unemployment fund deal, which sold unexpectedly. In the competitive market, about $219.7 million is expected, down from last week’s revised $305.4 million.
In economic news, the Institute Supply Management index grew to 53.9 in December, from 52.7 in November. The index reading came in higher than expected as economists had predicted the index would climb to 53.2.
“The factory sector continues to churn out decent growth,” wrote Robert Kavcic, economist at BMO Capital Markets Economics. “After cooling significantly through much of 2011, manufacturing activity appears to have stemmed the negative momentum that saw the ISM flirt with contraction territory late in the summer.”
