NEW YORK — Secondary trading in the municipal market is lighter than it’s been in the past three sessions. Investors have an eye toward this weekend’s critical Europe Union summit and have stopped in their tracks.
Market interest in high-grade credits in the 10-year sector, strong throughout the week, has lessened Thursday morning, a trader in Florida said. Although the sector remains desirable, he added, investors are content to do some housecleaning and square their positions.
“The market is treating this meeting in Europe as a big economic number — they choose to do nothing in front of it,” he said. “I haven’t seen anyone placing any big bets. Overall, we’ve seen some accounts do some housecleaning here. Bid-wanteds seem to be under control, and the amount of markets between dealers has been light.”
Tax-exempt yields are mostly unchanged, yet weaker as one ventures farther out along the curve, according to the Municipal Market Data scale. Yields are steady through 21 years. Beyond that, they’re flat to two basis points weaker.
The benchmark 10-year muni yield Wednesday held at 2.45%. It sits 48 basis points above the record low it held on Sept. 23.
The 30-year yield remained at 3.69%. The two-year yield hovered at 0.45% for a sixth consecutive session.
Treasury yields started the morning’s session slightly higher. The benchmark 10-year Treasury yield has inched up one basis point to 2.18%. The 30-year has increased two basis points to 3.20%. The two-year yield held steady at 0.28%.
The industry estimates the municipal bond market should see $6.7 billion in new issuance this week. Last week’s number was revised downward to $4.5 billion.
Three deals in particular, two negotiated and one competitive, are expected to provide a disproportionate share of the volume. One deal, $1.8 billion of California general obligation bonds, arrived with concessions. Another, $1 billion of New York City’s Hudson Yards Infrastructure Corp. senior revenue bonds, rolled in with tight pricing. In all, the market reacted with yields holding their ground.
In another sign of the market’s current strength, Barclays Capital and Goldman Sachs teamed up to price Ohio State University general receipts taxable bonds with 100-year maturities. The deal upsized from $300 to $500 million Wednesday based on robust investor demand.
In economic news, the Labor Department reported Thursday that initial claims for U.S. state unemployment benefits decreased 6,000 to 403,000 in the week of October 15. The numbers fell just shy of expectations.
Initial claims for the most recent week decreased 25,000 from the 428,000 level for the week of September 17.
Economists whom Market News International surveyed had anticipated initial claims to register 405,000. That is 1,000 more than the previously reported 404,000 for the week of October 8. The previous week’s claims were revised higher to 409,000.
