NEW YORK — Sufficiently strong technicals have the municipal market on sound footing to absorb this week’s coming supply.
Muni yields have started the week steady across the curve, according to the Municipal Market Data scale. The market will likely see a continuation of Friday’s picture: heavy December reinvestment money and light supply in the secondary.
Last week’s large deals were well-placed, a trader in New York said. The follow-through in the marketplace has been: the primary supply comes reasonably cheap; it trades up in the secondary; customers get what they want, he said. As a result, there hasn’t been much overhang in the Street of secondary offerings or syndicates that weren’t well-placed.
Treasuries and this week’s coming meeting in Europe will set the tone, the trader said.
“For this week, the market is fine,” he said. “Guys have money. There’s not a huge supply. The Street’s not heavy. All those things dictate that, though the market might be slow, it’s OK if Treasuries stay in this range.”
The benchmark 10-year yield finished Friday’s session four basis points lower at 2.18%. The two-year yield ended the day flat at 0.39%. The 30-year yield finished down three basis points to 3.83%.
Treasuries started Monday’s session with a weaker tone across the curve. The benchmark 10-year yield rose six basis points to 2.10%.
The two-year yield inched up one basis point to 0.27%. The 30-year yield climbed seven basis points to 3.09%.
Primary market volume should remain near the $6 billion range this week. Industry estimates for expected market volume total $5.82 billion this week, against a revised $5.88 billion last week. But there are no mega deals expected for this week.
Morgan Stanley is expected to pace the negotiated market when it prices $550 million revenue of New York City Transitional Finance Authority building aid revenue bonds. Retail investors should have a crack at the bonds on Monday and Tuesday, while institutions will have their opportunity on Wednesday.
Barclays Capital is expected to follow when it prices $400 million of Puerto Rico Public Finance Corp. commonwealth appropriation bonds. The bonds are also expected to reach the market Wednesday.
Siebert, Brandford Shank & Co. is expected to price $380 million of DeKalb County, Ga. second resolution water and sewer revenue bonds. Investors should have a chance to buy on Monday.
In the competitive market, New York State is expected to sell $316.9 million of general obligation bonds in two series starting Tuesday. The larger series, $285.8 million, should mature from 2012 to 2041. The balance, $31.1 million of taxable GOs, is expected to mature from 2012 to 2021.
