NEW YORK — The muni market has largely ignored the message and tone of the first of two days of congressional testimony from Federal Reserve Chairman Ben Bernanke. The Fed chairman told the House Financial Services Committee that the Fed is prepared to act, to either tighten or loosen monetary policy, if necessary. In response, Treasury yields have risen throughout the day, but not dramatically.
But Bernanke’s remarks have given risk assets a little boost, with the prospect that he might be considering a third round of quantitative easing, said Mike Pietronico, chief executive of Miller Tabak Asset Management.
“From the perspective of the municipal market, it generally is not going to have a direct influence unless it brings Treasury rates much higher,” he said. “And it doesn’t look to be doing that to any great degree. So, from the muni market’s perspective, it’s a non-story today. It’s more of an equity-market and commodity-market story.”
As though on cue, the major equities indexes have responded. They’ve all risen at least 1.05% by early afternoon.
Muni yields reacted, as well. But instead of rising, they were firmer along much of the curve heading into Wednesday afternoon, according to the Municipal Market Data scale. They were steady for maturities in 2019 through 2021 and at the long end of the curve.
Yields for maturities between 2015 and 2018 were flat to three basis points lower. Munis maturing 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.
Treasury yields ventured into the afternoon mostly weaker, though not in any pronounced way, following Bernanke’s testimony. The 10-year yield rose six basis points to 2.95%, though still below 3.00%.
The 30-year yield also increased six basis points to 4.24%. The two-year yield remained unchanged at 0.37%.
In the competitive market Wednesday, Bank of America Merrill Lynch won $224 million of Florida State Board of Education public education capital outlay refunding bonds. The bonds were rated Aa1 by Moody’s Investors Service, and triple-A by Standard & Poor’s and Fitch Ratings.
Yields range from 2.50% with a 5.00% coupon in 2019 to 4.10% with a 4.00% coupon in 2028. Credits maturing from 2013 to 2018, from 2020 to 2022, and in 2029 were sold, but not available.
Bank of America Merrill Lynch also won $167 million of Charleston County, S.C., general obligation capital improvement transportation sales tax bonds. The bonds are rated triple-A by Moody’s and Standard & Poor’s.
Yields range from 2.30% with a 5.00% coupon in 2019 to 3.90% with a 4.00% coupon in 2029. Bonds maturing from 2012 to 2018, as well as 2023 and 2024 were sold, but not available.
The secondary market has mostly been quiet. The day’s large new competitive issues have seen firm bidding, according to MMD analyst Randy Smolik.
