NEW YORK – The tax-exempt market weakened, following Treasuries, ahead of another busy day of new issuance.
After stumbling on large new issues last week, demand is also failing to match this week’s supply.
Munis were slightly weaker Tuesday morning, according to the Municipal Market Data scale. Yields inside six years were steady while yields outside seven years rose up to two basis points.
On Monday, the 10-year yield closed steady at 1.90% for the third consecutive trading session while the 30-year closed flat at 3.18% for the second session. The two-year was steady at 0.32% for the seventh straight session.
Treasuries were weaker Tuesday morning. The benchmark 10-year yield and the 30-year yield each rose two basis points to 1.62% and 2.74%. The two-year was steady at 0.28%.
In the primary market, part of the biggest deal of the week is expected to be priced for institutions. The Michigan Finance Authority is expected to issue $2.69 billion of unemployment obligatory assessment revenue bonds in two series. The bonds in both are rated triple-A by the major rating agencies.
Citi is expected to price the first series of $1.46 billion for institutions, following a retail order period Monday.
On Monday’s pricing, yields ranged from 0.40% with 2%, 3%, and 5% coupons in a split 2014 maturity to 1.63% with 3%, 4%, and 5% coupons in a split 2019 maturity. Credits maturing in 2013 were offered via sealed bid. Portions of bonds maturing between 2013 and 2019 were not offered for retail.
Bank of America Merrill Lynch is expected to price for institutions the remaining $1.23 billion on Wednesday.
Goldman, Sachs & Co. is expected to price for retail $2 billion of Dormitory Authority of the State of New York general-purpose New York personal income tax revenue refunding bonds. The bonds are rated AAA by Standard & Poor’s and Fitch Ratings.
JPMorgan is expected to price $1.25 billion of Florida’s Citizens Property Insurance Corp. bonds and notes, rated A2 by Moody’s Investors Service and A-plus by Standard & Poor’s and Fitch.
Wells Fargo Securities is expected to price for institutions $519.9 million of Connecticut general obligation bonds, following a retail order period Monday. The credit is rated Aa3 by Moody’s and AA by Standard & Poor’s, Fitch, and Kroll Bond Ratings.
In the retail order period, yields ranged from 0.25% with a 3% coupon in 2013 to 2.67% with 2.5% and 5% coupons in a split 2025 maturity. The bonds are callable at par in 2022.
In the competitive market, Los Angeles Unified School District is expected to auction $600 million of short-term notes, rated SP-1-plus by Standard & Poor’s.
Also, Harris County, Texas, is expected to issue $375 million of short-term notes, rated SP-1-plus by Standard & Poor’s and F1-plus by Fitch.