NEW YORK — The municipal market opened up firm Wednesday, on the heels of a strong day of trading and new issuance. Activity in the secondary is light, with little product, said a trader in New York.
“The market seems pretty firm so far,” he said. “I don’t see any give today. And I don’t see a whole lot of bonds around. It seems like a lot cleaned up in the secondary earlier in the week.”
The market awaits the outcome and tone of two days of congressional testimony from Federal Reserve Chairman Ben Bernanke. Treasury yields have risen throughout the morning. In testimony before the House Financial Services Committee, Bernanke said the Fed is prepared to act if need be to either tighten or loosen monetary policy.
Muni yields were firmer in spots along the curve Wednesday, according to the Municipal Market Data scale. They were steady for maturities in 2013 and 2014, 2019 through 2021, and at the long end of the curve.
Yields for maturities between 2016 and 2018, and from 2022 through 2035 were flat to one basis point lower.
The benchmark 10-year muni yield fell four basis points Tuesday to 2.66%, 11 basis points over the past three sessions. It sits 32 basis points beneath its average for 2011.
The 30-year yield also lost four basis points, falling to 4.30%, or 32 basis points under its average for the year.
The two-year yield ticked down two basis points to 0.40%, after 20 straight sessions at 0.42%, and another 17 at 0.44%. It stands at its nadir for the year and 20 basis points below its average for 2011.
All told, munis outperformed Treasuries across the curve Tuesday.
Treasury yields started Wednesday weaker across the curve. The 10-year yield rose four basis points to 2.93%, though still comfortably below 3.00%.
The 30-year yield increased two basis points to 4.18%. The two-year yield inched up one basis point to 0.38%.
Muni ratios to Treasuries have been favorable at both the 10-year level and the longer end of the yield curve, MMD numbers show. The 10-year sits at around 92%, its lowest level since April. The 30-year, at around 103%, stands at its cheapest level since this time in May. Both look fairly attractive and have enticed buyers, traders said.
But the levels would have to continue in order to garner any sustained attention from sidelined investors, as happened Tuesday, said the trader. “Right now, I don’t see guys jumping in like crazy here.”
This week’s new issuance has received a strong reception thus far, according to Janney Capital Markets’ Alan Schankel. This is particularly true for the Wells Fargo Securities’ pricing of $718.2 million Dormitory Authority of the State of New York personal income tax revenue bonds and Bank of America Merrill Lynch’s $400.4 million of New York Metropolitan Transportation Authority revenue bond pricing.
Muni bond issuance is expected to return to June’s average volume levels after holiday-shortened last week’s anemic $878.4 million.
