NEW YORK – The tax-exempt market had a hesitant tone Tuesday morning as traders couldn’t decide which way the market was heading after a double-digit rally Monday.
“The market feels very weird right now,” a New York trader said, adding that participants aren’t sure which way the market is heading, so trading is going both directions. “Nobody wants to buy bonds here and get caught on the way down.”
Munis were mostly flat Tuesday morning, according to the Municipal Market Data scale. Yields inside five years were steady. Yields outside six years were steady to one basis point lower.
On Monday, the two-year yield dropped three basis points to 0.33% while the 30-year yield fell seven basis points to 3.35%. The 10-year yield plunged 15 basis points to 1.97%, falling below 2.00% for the first time since March 6.
After yields dropped double digits Monday, the Treasury rally continued Tuesday morning. The two-year yield fell one basis point to 0.31% while the 30-year yield fell two basis points to 3.16%. The benchmark 10-year yield dropped three basis points to 2.01%.
In the primary market, Barclays Capital is expected to hold its second day of retail for $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. Institutional pricing is expected Wednesday.
In the first day of retail pricing, yields ranged from 0.40% with 2.5% and 4% coupons in a split 2014 maturity to 3.90% with a 4% coupon in 2042. Credits maturing between 2023 and 2026, between 2028 and 2031, and in 2037 and 2041 were not offered for retail. The bonds are callable at par in 2022.
Barclays is expected to reprice $671.9 million of Virginia Small Business Financing Authority senior lien revenue bonds, rated BBB-minus by Standard & Poor’s and Fitch.
In the preliminary pricing Monday, yields ranged from 4.45% with a 4.25% coupon in 2022 to 5.5% priced at par in 2042. The bonds are callable at par in 2022.
Barclays is expected to hold its first day of retail of $555 million of Connecticut taxable and tax-exempt general obligation bonds, as well as SIFMA index bonds, rated Aa3 by Moody’s and AA by Standard & Poor’s and Fitch.
Goldman, Sachs & Co. held preliminary pricing for $237.2 million of Agriculture Improvement and Power District refunding revenue bonds for the Arizona Salt River Project Electric System. The credits are rated Aa1 by Moody’s and AA by Standard & Poor’s.
The bonds yield 3.08% with a 5% coupon in 2029, 3.13% with a 5% coupon in 2030, and 3.19% with a 5% coupon in 2031. The bonds are callable at par in 2022.
In the competitive market, Los Angeles is expected to auction $240.1 million of GO bonds.
