NEW YORK — Issuers have at least one more week’s worth of solid new supply planned for the municipal market.
Investors, who cast about hungrily for the past few days seeking any quality paper in which to park their newfound reinvestment cash, seemingly swallowed up most of this week’s supply without chewing. Now issuers hope that investors, who still have reinvestment money filling their coffers, will regard next week’s supply in a similar fashion.
“On the one hand, you have guys who are already in vacation mode,” a trader in California said. “On the other hand, you have the guys who want to crank out the deals before year-end. It’s a balance there. And there’s a lot of reinvestment money that came in at the beginning of this month.”
The market has not yet begun its seasonal wind-down. Industry estimates place new issuance expected to be sold next week at $5.69 billion against a revised $6.27 billion this week.
That breaks down to an estimated $1.6 billion in competitive offerings, compared with a revised $1.75 billion this week. In negotiated offerings, $4.09 billion is slated for sale, versus a revised $4.48 billion this week.
Muni yields appear to be holding this week’s gains. The Municipal Market Data scale had yet to update at press time. But yields were steady across the curve to start the day’s session.
“The market feels really strong,” the California trader said. “The biggest contributor to that is the lack of supply. Everything that comes to market is coming at very reasonable spreads to triple-A MMD.”
The benchmark 10-year yield skipped down three basis points Thursday to 1.97%. It has fallen 61 basis points since Oct. 12, and equals the lowest point it’s reached in 2011 — a level it last saw on Sept. 23.
The tumble lowered its ratio to Treasuries to 100% from 106.37% three days ago, considerably closer to the 2011 calendar-year average of 97.26%.
The muni-Treasury ratio has gotten richer recently, falling 18 percentage points in 10 sessions since Nov. 23, and 28 percentage points from its calendar-year high of 128.42%, achieved on Oct. 5.
The two-year muni yield held fast at 0.36% for a second straight session. The 30-year ticked down one basis point to 3.69%.
Treasury yields jerked awake after a listless start to the day’s session. Crossing noon, the benchmark 10-year yield has jumped eight basis points to 2.05%.
The two-year yield has held its position at 0.23%. The 30-year yield leapt nine basis points to 3.09%.
