Municipal bond yields firmed alongside treasuries Tuesday morning as investors anticipated a heavy volume of new issues coming to market beginning tomorrow.
“It looks like munis are slightly better on the day along the majority of the curve and that may just be as they’re riding with treasuries as the 10-year benchmark falls,” a New York-based trader said in an interview.
Yields on the Municipal Market Data triple-A scale Tuesday slid as much as three basis points on bonds maturing between 2029 and 2040. Yields on bonds maturing six to 15 years out, as well as between 2041 and 2043 slid as much as two basis points. The shorter end of the curve was under review.
“I haven’t seen anything too active yet, as most people are solely focused on the new issuance,” the trader said. “We’re seeing such a large issuance this week because people are trying to get ahead of the Federal Reserve’s [Federal Open Market Committee] meeting and any uncertainty coming out of Washington in the next few weeks.”
Investors have remained wary of a prospective slowdown in the government’s $85 billion monthly bond purchase as the economy improves.
Total volume for the week is expected to reach $11.33 billion, up from $6.23 billion last week, Ipreo, The Bond Buyer and Thomson Reuters numbers show. Jefferies LLC held a second day retail order period for $700 million of New York general obligation bonds Monday in which yields widened from the initial offering price. Institutional pricing for the deal is expected today.
Treasuries continued firming from Monday, with the benchmark 10-year yield down three basis points to 2.82%, the 30-year down one basis point to 3.86% and the two-year yield unchanged at 0.30%.