NEW YORK – Tax-exempts will look to the primary market for direction as secondary trading remains light and munis start the day slightly weaker.
“The market is still fairly quiet,” a New York trader said. “People have been selling since last week, but there's still a bid out there. But not a good one.”
The Municipal Market Data scale was not updated by press time. On Monday, the two-year yield closed steady for its fourth consecutive trading session at 0.30%, remaining at its record low set Oct. 10. The 30-year yield was steady at 3.22%. The 10-year yield rose two basis points to 1.79%.
Since the most recent rally began Jan. 24, muni yields fell as much as 22 basis points across the curve up until Friday. The losses Friday and Monday erased gains munis made since Jan. 26.
Treasuries were weaker across the curve. The two-year yield rose one basis point to 0.25% while the benchmark 10-year yield soared six basis points to 1.96%. The 30-year yield jumped five basis points to 3.14%.
“We advocated a selective approach to local credits in North Carolina, adding to a list that includes Rhode Island and Georgia where local issuers will bear the brunt of the decline of fiscal flexibility at the state level,” said analysts at Trident Municipal Research. “We would look at any general market strength this week as an opportunity to lighten up exposure – portfolio managers should have offerings in the market on any holdings in these areas.”
In the primary market, several big deals are expected to price.
Goldman, Sachs & Co. is expected to price for institutions $279.2 million of Shelby County, Tenn., general obligation refunding bonds, rated Aa1 by Moody’s Investors Service, and AA-plus by Standard & Poor’s and Fitch Ratings.
In retail pricing Monday, yields on the first series, $264.1 million of GO refunding bonds, ranged from 0.21% with a 2% coupon in 2013 to 2.75% with a 3.5% coupon and 2.62% with a 5% coupon in a split 2028 maturity. The bonds are callable at par in 2022 except for credits maturing in 2023 and 2024.
Yields on the second series, $15.1 million of special GO school refunding bonds, ranged from 0.21% with a 2% coupon in 2013 to 1.38% with a 4% coupon in 2019.
Citi is expected to price $250 million of San Antonio Water System revenue refunding bonds, rated Aa1 by Moody’s, AA-plus by Standard & Poor’s, and AA by Fitch.
Wells Fargo is expected to price $140.7 million of Conroe, Texas, Independent School District unlimited tax school building and refunding bonds. The credit is rated Aa2 by Moody’s and AA by Standard & Poor’s.
