Municipal bonds lost steam Monday afternoon as yields edged up before the onset of two of the week's biggest negotiated deals.
Traders said the market started the week slowly even as two issues - Minnesota Vikings stadium fund appropriation bonds and New York City Municipal Water Finance Authority revenue bonds - were offered to retail Monday.
"Bid-ask spreads are definitely wider today and munis are a little softer," a New York-based trader said in an interview. "We're probably going to wait for some direction from the limited primary market this week."
Minnesota's $467.9 million bond issue, delayed earlier in the month after legal complications, will finance a football stadium for the Minnesota Vikings. The bonds, $397.7 million tax-exempt and $70.26 million taxable, are rated AA by Standard & Poor's and Fitch Ratings.
Yields on the RBC Capital Markets-led deal ranged from 0.37% with a 3% coupon on securities maturing in 2016 to 3.93% with a 5% coupon on those maturing in 2038.
Bond maturing in 2018 featured a split maturity yielding 0.97% with coupons of 3% and 4%. Bonds maturing in 2015 were offered in a sealed bid. The bonds are callable at par in 2023.
Also in the negotiated market, Raymond James & Associates, Inc. priced $360 million of New York City Municipal Finance Authority water and sewer bonds.
The bulk of the bonds, $285 million, were offered at 4.31% with a 5% coupon maturing in 2047. Two other sets of 5%-coupon bonds, maturing in 2018 and 2019, were offered at yields of 0.64% and 0.89%, respectively.
Still, issuance for the week remains "benign," according to Janney Capital Markets. Volume this week could reach $4.89 billion, according to Bond Buyer and Ipreo data. Total bond sales last week came to $4.57 billion, according to Reuters.
"Everybody is trying to figure this out, as we don't have supply," another New York-based trader said. "There are just no bonds around. It's probably too early to tell which direction we're going."
Yields on some municipal bonds maturing after 2036 rose by one basis point Monday afternoon, according to Municipal Market Data's AAA scale read. Yields on bonds maturing from 2042 to 2044 rose by as much as two basis points.
Treasuries softened Monday, with the 10-year and 30-year yields ticking up one basis point to 2.75% and 3.67%, respectively. The two-year was up one basis point as well at 0.36%.
