NEW YORK – The tax-exempt market was quiet Monday afternoon. After a strong rally over the past several weeks, munis are now following Friday’s weaker direction.

“We are seeing a little activity in the secondary but it’s somewhat quiet,” a New Jersey trader said. “I think that after the big run up we are seeing the Municipal Market Data scale adjusting itself more in line with recent deterioration in the Treasury market. Because of that, yields have backed off significantly throughout most of the curve since the end of last week. So I think we’re going to see that adjustment reflected in the issues that come to market this week.”

Munis were steady to weaker, according to the MMD scale. Yields inside eight years were steady while yields on the nine-years to 13-years rose as much as two basis points. The 14- to 24-year yields were steady while yields outside 15 years rose as much as two basis points.

On Friday, the two-year yield closed steady for its third consecutive trading session at 0.30%, remaining at its record low set Oct. 10. The 10- and 30-year yields jumped eight basis points each to 1.77% and 3.21%, respectively.

Since the most recent rally began Jan. 24, muni yields fell as much as 22 basis points across the curve up until Friday. The losses Friday erased gains munis made since Jan. 27.

Treasuries continued to firm on fears that Greece will not reach a resolution of its fiscal crisis. The two-year yield fell one basis point to 0.24% while the benchmark 10-year yield dropped three basis points to 1.91%. The 30-year yield fell five basis points to 3.10%.

This week, the tax-exempt market can expect a paltry $3.91 billion, down from last week’s revised $4.38 billion. On the negotiated calendar, $3.02 billion is expected, up from last week’s revised $2.94 billion. In competitive deals, $893.1 million is expected, down from last week’s revised $1.44 billion.

In the secondary market, activity was very slow. Trades reported by the Municipal Securities Rulemaking Board showed weakening.

Bonds from an interdealer trade of Carrizo Springs, Texas, Consolidated Independent School District 5s of 2027 yielded 2.60%, nine basis points higher than where they traded last Thursday.

A dealer sold to a customer New York City Municipal Water Finance Authority 5s of 2045 at 3.83%, four basis points higher than where they traded Friday.

Another dealer sold to a customer Kansas Development Finance Authority 4s of 2022 at 2.53%, five basis points higher than where they traded Friday.
 

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