NEW YORK — The municipal market has been struggling to get its foothold Monday morning. Few trades in the secondary have provided a direction, a trader in San Francisco said.
This has been the trend for a few weeks now, he added. Retail buyers have been discouraged by low yields.
“We still see negative flows in the investment-grade area,” the San Francisco trader said. “The market’s dominated by retail. If retail isn’t buying but is actually selling, it’s tough to find more trading. So, guys buy stuff, put it on their shelves and it’s not going out the door—so they don’t need to buy any more.”
Muni yields started out flat across the curve Monday, according to the Municipal Market Data.
The 10-year benchmark yield held at 2.63% for the seventh day in a row, the MMD scale showed. The 30-year yield held at 4.23% for a second straight day, its low since Nov. 12.
The two-year yield, at 0.42% for the 10th consecutive day, is hovering at its lowest level since Sept. 7, according to MMD numbers. Before that, it stayed at 0.44% for 17 straight sessions.
Treasury yields mostly weakened across the curve to start the week. The 10-year yield held steady at 2.87%. The two-year yield inched up two basis points to 0.36%. The 30-year yield rose three basis points to 4.21%.
New issuance should continue to hold this week at middling levels. Munis scheduled for sale this week total $5.62 billion against a revised $5.82 billion last week, according to The Bond Buyer.
This makes it four consecutive week that issuance has topped $5 billion. Two weeks ago, the market saw $5.11 billion, following $7.8 billion the week before. For the year, new deals have averaged around $3 billion.
The largest deals slated for the week arrive Wednesday. They include a New York deal for $975 million from the Tobacco Settlement Financing Corp., and a $900 million from the Citizens Property Insurance Corp. in Florida. Also, the Houston Airport System on Tuesday is expected to issue $500 million of subordinate-lien revenue refunding bonds.
The coming holiday should give the secondary a boost, wrote Piper Jaffray in a recent research note. “With a light calendar and holiday-shortened weeks coming up, municipals could be poised to perform and provide some much-needed secondary activity.”
