NEW YORK — Yields in the municipal marketplace are rising slightly from the belly of the curve on out Tuesday morning in light trading, pointing to a slowdown in volume since Friday.
And the timeframe that dealers are holding on to inventory might be creating more weakness than anything else, said a trader in Florida. Dealers with shorter time horizons, and who need to push paper out the door may be the cause.
But the trader hasn’t seen that weakness in the customer market, as they appear to be getting good bids.
“It’s a very inquiry-specific marketplace right now,” he said. “I can’t really point to any strength.”
Tax-exempt yields are slightly higher this morning, with all but the front end of the curve trending up, according to the Municipal Market Data scale.
Yields for maturities after 2017 are flat to two basis points higher. There is no read yet for yields at the front end of the curve.
Muni yields were mostly flat across the curve Monday. The 10-year muni yield held at 2.15%, the lowest closing level ever recorded by MMD.
The two-year muni yield stayed at 0.30%, its lowest yield in more than 40 years. The 30-year muni yield ticked up one basis point to 3.80%.
Treasury yields are weaker Tuesday morning. The benchmark 10-year Treasury yield jumped four basis points to 2.13%.
The two-year yield ticked up one basis point to 0.22%, still just four basis points above its all-time low. The 30-year yield climbed five basis points to 3.46.
New issuance year-to-date remains well below 2010. The situation will likely not improve this week. Industry estimates predict municipal bond sales of $3.65 billion versus a revised $4.72 billion last week.
The largest deal of the week came to market Monday when JPMorgan priced for institutions $494.3 million of King County, Wash., sewer revenue and refunding bonds a day early. It repriced Monday, with yields three basis points firmer on the short end of the curve, and three basis points weaker at the long end.
New issuance Tuesday should give the market more direction, the trader said. “We have to wait to see what the leadership from the primary looks like today,” he added.
In economic news, the U.S. Census Bureau and the Department of Housing and Urban Development reported jointly Tuesday that sales of new single-family houses in July 2011 were at a seasonally adjusted annual rate of 298,000.
The number stands 0.7% below the revised June rate of 300,000, but 6.8% above the July 2010 level of 279,000.
