NEW YORK – The tax-exempt market was firmer Tuesday morning ahead of the expected pricing of the biggest deal in the primary market this week.
Traders said that as prices move higher, many participants jump to the sidelines.
“Munis are up again,” a New York trader said. “When rates go lower, it’s not good. It takes retail out of the market and they are 90% of the business.”
Munis were steady to firmer Tuesday morning, according to the Municipal Market Data scale. Yields inside 17 years were steady while outside 18 years, yields fell one basis point.
On Monday, the two-year yield closed flat at 0.31% for the ninth consecutive trading session while the 30-year ended flat at 3.25% for the sixth consecutive trading session. The 10-year yield finished at 1.87% for the fourth time.
Treasuries were slightly weaker. The benchmark 10-year yield and the 30-year yield each rose one basis point to 1.94% and 3.13%. The two-year was steady at 0.27%.
In the primary market, Jefferies & Co. is expected to price $1.8 billion of Illinois general obligation bonds, rated A2 by Moody’s Investors Service, A-plus by Standard & Poor’s, and A by Fitch Ratings.
Bank of America Merrill Lynch is expected to price for retail $200 million of Ohio Higher Educational Facility Commission hospital revenue bonds for the University Hospitals Health System. The bonds are rated A2 by Moody’s and A by Standard & Poor’s.
In economic news, the overall economy grew for the 35th straight time, while the manufacturing sector grew for the 33rd time, according to the Institute for Supply Management.
The index climbed to 54.8 in April from 53.4 in March. The increase in the index beat the 53.0 reading economists had expected.