NEW YORK – The tax-exempt market rallied Monday for the second consecutive trading session, following Treasuries, as nervous investors led a flight to quality.

“The muni rally is based on a flight to quality from equities into Treasuries,” a New York trader said.

Indeed, munis were much stronger Monday morning, according to the Municipal Market Data scale. Yields on the two- to five year fell five to seven basis points while the six- to 22-year yield plummeted 10 to 12 basis points. Outside 23 years, yield dropped seven to 10 basis points.

On Thursday, the two-year yield finished steady at 0.36% for its 14th consecutive trading session while the 30-year yield finished flat at 3.42% for its third trading session. The 10-year yield closed down four basis points at 2.12%.

Treasuries were much stronger. The two-year yield dropped three basis points to 0.32% while the 30-year yield fell 14 basis points to 3.19%. The benchmark 10-year yield plummeted 15 basis points to 2.03%.

In the primary market, $7.68 billion in new issuance is expected, up from last week’s revised $5.12 billion. On the negotiated calendar, $6.16 billion is expected, up from last week’s revised $3.22 billion. In competitive deals, $1.52 billion is expected, down from last week’s revised $1.9 billion.

Barclays Capital is expected to hold its first day of retail of $800 million of New York City Transitional Finance Authority future tax-secured bonds and subordinate bonds, rated Aa1 by Moody’s Investors Service and AAA by Standard & Poor’s and Fitch Ratings. A second day of retail is expected Tuesday follow by institutional pricing Wednesday.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.