Municipal market investors, laden with cash, are driving yields lower Wednesday as activity has accelerated in both the primary and secondary markets.
Traders see strength in deals executed across the yield curve, as well as many requests for buy orders. Activity has picked up
"We're pretty strong, much more active than yesterday," a trader in Illinois said. "Bonds are just getting cleaned up. It doesn't really matter where; people are just buying. There's a lot of money to be put to work."
Levels for trades on the retail front, though, have softened slightly, despite an increase in bid-wanteds, a retail trader in Texas said.
"These levels kind of got a little overdone, just because there was so little paper around," he said.
Long-term muni sales should rise this week, though not dramatically. Anticipated new-issue volume is expected to weigh in at $5.00 billion, against $3.81 billion last week.
That breaks down into $3.30 billion scheduled for negotiated sales and $1.70 billion of competitive.
On the competitive side of the ledger, the state of Washington auctioned the two largest competitive deals. Both were rated Aa1 by Moody's and AA-plus by Standard & Poor's and Fitch Ratings. And both are also callable at par in 2024.
JPMorgan won $348.3 million of Washington state various-purpose general obligation bonds. Yields ranged from 2.37% with a 5.25% coupon in 2022 to 3.96% with a 5.00% coupon in 2039.
Morgan Stanley won $269.3 million of Washington state motor vehicle fuel-tax GOs. Yields ranged from 0.15% with a 6.00% coupon in 2015 to 3.96% with a 5.00% coupon in 2039.
In addition, Maryland is expected to auction $139 million of university system auxiliary facility and tuition revenue bonds.
Bank of America Merrill Lynch on Wednesday is expected to price a $1 billion taxable issue for Port Authority of New York and New Jersey, structured as a bullet maturity in 2046.
Barclays should price $650.4 million of New York State Thruway Authority general revenue bonds in the negotiated market. They are rated A2 by Moody's Investors Service and A by Standard & Poor's.
On Tuesday, Barclays held a retail order period for the credits. Traders said the deal received a solid reception.
Yields on the Municipal Market Data triple-A scale have strengthened beyond four years on the curve Wednesday, with the greatest firmness past 20 years. Tax-exempt yields for credits maturing after 2018 are flat to three basis points lower.
On Tuesday, the 10-year triple-A yield held at 2.59%, the 30-year at 3.90% and the two-year at 0.34% for an 11th consecutive session.
Some yields at the far end of the curve of the Municipal Market Advisors benchmark triple-A scale firmed while others softened Tuesday by a basis point in either direction.
The 10-year triple-A yield held at 2.59%. The two-year remained at 0.34%, while the 30-year increased one basis point to 4.12%.
Treasury yields continue to weaken across the curve. The 10-year yield has risen three basis points to 2.86%. The two-year has climbed two basis points to 0.41%, while the 30-year yield has increased two basis points to 3.76%.
