The municipal bond market adopted a weaker tone beyond the front end of the curve out of the gate Monday.
Faced with a larger calendar than it's seen over the previous few weeks, range-bound Treasury yields and uncertainty over sequestration, market participants are approaching the week with caution and patience, a trader in New York said. Activity Monday morning was limited to some swap-related deals on the Street, he added.
"We've been locked in this trading range for two and a half weeks," the trader said. "So, you need something to break out here. We're seeing bonds basically within 10 basis points, although things are cheapening up. The market's tired of these levels here, and they're looking for something to change. As long as you don't have the Treasury market pushing people's hands, people are going to be patient here. They're going to let supply come."
This week, $7.80 billion of bonds is expected to reach the primary. This represents a large increase from last week's revised $4.20 billion.
On the negotiated calendar, $6.73 billion is expected, up from last week's revised $1.87 billion. For the competitive market, $1.07 billion should be auctioned, down from last week's revised $2.33 billion.
Leading the charge, JPMorgan is expected to price $1.3 billion of Regents of the University of California new money taxable and tax-exempt bonds. The offering should arrive in two series: $800 million of tax-exempt debt due to arrive Thursday, following a retail order period on Wednesday; and $500 million of taxable debt, which should be priced Wednesday.
Morgan Stanley follows with an expected pricing of $853.72 million of New York City general obligation debt. The credits are expected to arrive Wednesday, following a two-day retail order period, as a combination of tax-exempt new money and refunding debt, but the structure was still being determined Friday.
The market opened Monday's session with a weaker tone. Yields beyond eight years were flat to two basis points higher, according to the Municipal Market Data triple-A GO scale.
The 10-year held steady at 1.90% for the third session while the 30-year yield closed the day at 2.94% for the second session. The two-year closed at 0.31% for the fourth session.
Yields on the Municipal Market Advisors 5% coupon triple-A benchmark scale ended flat to one basis point lower. The 10-year yield held at 1.90% for the third session. The 30-year yield closed at 3.02% for the second session. The two-year finished unchanged at 0.35% for the 19th session.
Treasuries started Monday weaker beyond the front end of the curve, after closing out the week mostly stronger for a third straight session. The benchmark 10-year yield and the 30-year yield rose two basis points each to 1.99% and 3.18%, respectively. The two-year yield, though, held at 0.27%.