The tax-exempt market opened Monday morning with a quiet, but slightly weaker tone as the government shutdown extended into its second week.
A trader in Chicago said trading volume was down 56% Monday morning from Friday's activity and trades on the long-end were weaker.
A $4 million block of Chicago Board of Education 5s of 2042 traded at 5.35%, up from 5.22%.
Still, the drop in yields over the past month has given issuers the chance to come back to market with refunding deals that had previously been postponed after the summer selloff. This trader said a backlog of Michigan limited tax general obligation bond deals is building. "A lot of refundings are starting to pop into the sight of Michigan municipalities who were sidelined due to the Detroit Chapter 9 fears and lack of supply hindering the overall market of Michigan paper," he said.
"Battle Creek was the first sizeable deal and it went really well, all things considered. There was a lot of interest and no point penalty," he said. "Michigan is picking up a lot of these small issues that are testing the market."
Looking to this week, $3.76 billion in new deals are expected, up from last week's revised $2.77 billion. On the negotiated calendar, $3.04 billion should be issued, up from last week's $2.21 billion. In the competitive market, $724.1 million is expected to be issued, up from last week's revised $558.8 million.
On Friday, yields on the triple-A Municipal Market Data scale were unchanged. The 10-year and 30-year yields were flat for the third session at 2.54% and 4.11%, respectively. The two-year was steady for the fourth session at 0.37%.
Yields on the Municipal Market Advisors benchmark scale were steady to one basis point higher. The 10-year yield increased one basis point to 2.70%. The 30-year yield was flat at 4.26% for the third session and the two-year closed unchanged at 0.54% for the 12th session.
Treasuries were stronger Monday morning as the government shutdown extended into its second week. The benchmark 10-year yield fell four basis points to 2.61% and the 30-year yield slid three basis points to 3.70%. The two-year yield fell one basis point to 0.33%.