NEW YORK — The municipal market has so far been taking a break from its recent weakening, as new issuance, light activity in the secondary, and hesitating Treasuries are providing little in the way of direction.
There is a good amount of bid-wanted lists in the secondary this morning, according to a trader in New York. But few have garnered interest.
“There’s not a lot of directional trade movement,” he said. “[The market] seems to be trading in line from normal scales that we saw from changes yesterday. Maybe it’s slightly cheaper in the 10-year.”
Tax-exempt yields are mixed to flat Wednesday. They are steady out to three years and beyond 21 years, according to the Municipal Market Data scale. Yields between four and 21 years are flat to one basis point higher.
The 10-year muni yield jumped seven basis points on Tuesday to 2.09%. It erased entirely the rally that brought it to a record low of 1.97% late last week.
The 30-year yield climbed five basis points on the day to 3.52%, up eight basis points from its all-time low. The two-year yield remained at 0.32% for a ninth straight session.
Treasury yields are mostly flat to start the day. The past two sessions they’ve seen rate increases that have reversed the incredible rally they saw at the intermediate and longer parts of the curve last week.
The benchmark 10-year Treasury yield has inched up one basis point to 2.00%. The two-year yield has held at 0.25%.
The 30-year yield, which plunged as much as 53 basis points last week, is also unchanged at 3.08%.
Yields are still attractive, despite the rise in rates and subsequent changes in muni ratios to Treasuries from last week’s highs, according to Janney Capital Markets’ Alan Schankel. “Muni to Treasury ratios, based on AAA benchmark, have retreated from last week’s highs, but are still well above 100% across the curve,” he wrote in a research brief. “Ratios are 105% in 10 years and 114% in 30 years, reflecting 2.09% and 3.52% tax-free yields, respectively.”
The market expects a small decrease in new supply for this week, after a considerable increase in issuance last week. This week, the market expects an estimated $6.83 billion in new supply. Last week saw a revised $7.86 billion of volume.
In economic news, the Commerce Department reported Wednesday that durable orders for August fell 0.1% following a strong July. The numbers were weaker than predicted, signifying the manufacturing sector may struggle going forward.
Weak areas include autos, with an 8.5% decline; primary metals, with a 0.8% decline; and fabricated metals, with a 0.5% decline. Machinery rose 0.1%. July orders levels were revised lower.
