The tax-exempt market was steady ahead of a full day of primary issuance expected to hit the market. Traders said the market was waiting to see how deals were priced before deciding which direction to take.
"Munis are off to a slow start," a New York trader said. "There are too many deals this week. But we've been so busy the last couple weeks that it could just be a breather."
He added people are watching many of the smaller deals expected to price in the negotiated market later Tuesday to determine the market's strength.
Munis were steady Tuesday morning, according to the Municipal Market Data scale. On Monday, the 10-year tax-exempt yield jumped two basis points to 1.66%, hovering above its record low of 1.60% set Thursday. The 30-year muni yield finished flat at 2.84%, five basis points above its record low of 2.79% set Wednesday. The two-year was steady at 0.29% for the third consecutive session.
Treasuries continued to strengthen Tuesday morning. The benchmark 10-year yield dropped two basis points to 1.48% while the 30-year yield fell one basis point to 2.56%. The two-year was steady at 0.23%.
In the primary market Tuesday, Citi is expected to price $510 million of Michigan Finance Authority state aid revenue notes.
Ziegler Capital Markets is scheduled to sell $311 million of Kansas Development Finance Authority hospital revenue bonds for the Adventist Health System/Sunbelt Obligated Group, rated Aa3 by Moody's Investors Service, AA-minus by Standard & Poor's and AA by Fitch Ratings.
Piper Jaffray & Co. is expected to price $200 million of triple-A rated San Antonio bonds, including $172 million of general improvement bonds, $27.5 million of certificates of obligation, and $18 million of tax-supported notes.
In economic news, personal income rose $61.8 billion, or 0.5%, in June, following a 0.3% gain in May. The June figure beat analysts' expectations of a 0.4% increase.
Personal spending inched up $1.3 billion, or less than 0.1%, in June following a 0.1% drop in May. Spending failed to meet analysts' expectations of a 0.1% gain.
"Before digging too deeply into what these data tell us about the economy, we should remember that they are already embedded in the published second-quarter GDP report, which showed the economy growing at 1.5%," wrote economists at RDQ Economics. "Core inflation trends have been steady at 1.8% but with headline inflation a half-percentage point below the Fed's target, there will be those arguing for more action at the FOMC meeting that gets underway this afternoon."