NEW YORK – Munis began to rally Monday morning after holding their ground on Friday following big moves in the Treasury market.
Munis finally gave in to the Treasury rally as yields fell by as much as five basis points. Treasuries continued to rally for the second day, falling 18 basis points on the long end since the rally began Thursday.
“The muni space is a little firmer here today with the performance of the Treasury market,” said a trader in North Carolina. “I think it’s pretty much underpinned by the amount of primary issuance that’s coming this week.”
The trader added it’s a “much firmer tone, but still somewhat reserved,” given what the market needs to digest in the primary space this week.
In Monday’s morning session, muni yields were falling in the long-end. There was a two to five basis points drop in the belly of the curve on out. In seven- to eight-year range, yields fell between three and five basis points. Nine years and beyond, yields fell between two and four basis points.
On Friday, muni yields closed unchanged from Thursday. The benchmark 10-year muni yield closed Friday at 2.46%. The two-year muni remained at 0.46% and the 30-year held its ground at 3.80%.
In Monday morning trading, the Treasury rally was going strong, continuing its streak from last Friday. Yields fell from two basis points to 12 basis points across the curve. The two-year yield fell two basis points to 0.28%, while the 10-year yield fell 10 basis points to 2.22%. The 30-year yield was down 12 basis points from Friday’s close to 3.25%.
In the primary calendar, the muni market can expect $8.24 billion for the first week of November. The negotiated calendar will see $6.7 billion while the competitive market will see $1.54 billion.
JPMorgan is expected to continue on Monday its retail order period the first series of its $715 million Connecticut general obligation bonds, following a retail order period last Friday. The bonds are rated Aa2 by Moody’s Investors Service and AA by Standard & Poor’s and Fitch Ratings.
In retail pricing, yields on the first series, $550 million of tax-exempt GO bonds, ranged from 0.46% with a 2% coupon in 2013 to 3.72% with a 3.625% coupon in 2030. Credits maturing in 2012 were offered via sealed bid. Bonds maturing between 2023 and 2028 and those with maturities in 2031 were not offered for retail investors. The bonds are callable at par in 2021.
The second series, $165 million of GO refunding bonds, were not available for retail.
