Municipal bond yields have stalled so far Wednesday morning in the face of light activity.
Market participants anticipate the arrival of the week's largest deals. But many traders appear content to sit and wait for prices to fall to more favorable levels.
"It's a flat tone right now," a trader in New York said. "You've just had a big run-up here, so I know I'm on hold right now until I see some type of reason. We don't have any supply pressure right now. I'm not chasing, unless it comes to me a little bit."
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"I don't know which way it's going to go," he said. "I'm kind of neutral, myself."
Muni sales this week should rise, 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.
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.
On the competitive side of the ledger, the state of Washington plans to auction $355.1 million of various-purpose general obligation bonds on Wednesday, as well as $273.9 million of motor vehicle fuel-tax GOs. In addition, Maryland is expected to auction $139 million of university system auxiliary facility and tuition revenue bonds.
Puerto Rico credits continue to firm in secondary market trading, Alan Schankel managing director of Janney Capital Markets, wrote in a research note. A block of general obligation 5s of 2041 traded at 8.17% on Tuesday, he wrote, falling from the 8.78% and 9.00% block trades from earlier this month.
"The big deals coming are just going to be gobbled up," the trader said. "There's plenty of demand out there."
Yields on the Municipal Market Data triple-A scale started Wednesday's session exactly where they ended the previous day: flat across the curve. 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 started the day two basis points weaker across the curve. The 10-year yield rose to 2.85%, the two-year increased to 0.41% and the 30-year yield climbed to 3.76%.
