NEW YORK – The tax-exempt market was stronger Wednesday morning as munis climbed higher and further defied weaker Treasuries.
“Munis are pretty strong this morning,” a New York trader said, despite lower Treasuries Tuesday and Wednesday. “There is a lot of money on the sidelines and people are betting that it goes into munis.”
The Municipal Market Data scale was not updated by press time. On Tuesday, the two-year yield closed steady at 0.31% for the fifth consecutive trading session. The 10-year yield and the 30-year yield each closed steady at 1.85% and 3.25%.
Treasuries were weaker across the curve. The two-year yield rose one basis point to 0.29% while the benchmark 10-year yield jumped two basis points to 1.99%. The 30-year yield increased three basis points to 3.15%.
In the primary market, JPMorgan is expected to price for institutions $464.2 million of Ohio hospital revenue bonds for the Cleveland Clinic Health System, following a retail order period Tuesday. The bonds are rated Aa2 by Moody’s Investors Service and AA-minus by Standard & Poor’s.
Morgan Stanley is expected to price for retail $268.5 million of Allen County, Ohio, hospital facilities revenue refunding and improvement bonds, rated A1 by Moody’s and AA-minus by Standard & Poor’s and Fitch Ratings.
Citi is expected to price $120 million of Indiana Finance Authority revenue and refunding bonds, rated Aa1 by Moody’s and AA-plus by Standard & Poor’s and Fitch.
In the competitive market, Nassau County is expected to auction $207.1 million of general obligation bonds, rated A1 by Moody’s and A-plus by Standard & Poor’s.
Colorado Springs will take bids on $110.2 million of revenue bonds, rated Aa2 by Moody’s and AA by Standard & Poor’s.
In economic news, durable goods orders fell $8.8 billion, or 4.2%, to $202.6 billion in March. The drop came after a downwardly revised 1.9% increase in February and is the largest month-over-month drop since January 2009.
Orders fell more than the 1.5% economists had expected.
“This is a very weak durable goods orders report as it shows orders excluding transportation down 1.5% at an annual rate in the first quarter, the first quarterly decline since the second quarter of 2009,” wrote economists at RDQ Economics. “However, we simply do not believe the weakness indicated by durable goods orders – ISM new orders averaged 55.7 in the first quarter versus 54.4 in the fourth quarter; Fed data show durable goods manufactured production up 15.6% in the first quarter versus 9.1% in the fourth quarter; and hours worked for durable goods factory production workers rose 8.7% in the first quarter versus 4.3% in the fourth quarter.”
The economists added, “From a first-quarter GDP perspective, this report points to a pickup in capital goods investment versus the fourth quarter and suggests that durable goods inventory investment added to growth.”