Market Post: Munis Open Week with Light Tone

The tax-exempt market opened Monday with a decent tone, though demand is expected to outweigh supply again this week as the new issue calendar remains light.

"Munis are fine," a New York trader said. "They have a relatively decent tone but there is very little going on. Maybe you couldn't sell bonds at your price but you could sell close enough - especially with so little supply."

"This week the new issue calendar is again light, and trading is expected to be range-bound," wrote Dan Toboja, vice president at Ziegler Capital Markets. "With such limited supply there isn't nearly enough paper to dislocate the market from the current levels. Yield paper is still in great demand, and we've seen spreads come in. If more yield paper doesn't come in the primary we may see desks chase into the lower-rated bonds as well. Until we get some direction from the broader Treasury market about mid- to long-term rates, we're unlikely to see a significant correction."

In the primary market this week, $4.35 billion in municipal bonds are expected, down from last week's revised $5.08 billion. On the negotiated calendar, $2.42 billion is expected to be issued, down from last week's revised $3.72 billion. On the competitive calendar, $1.93 billion should be auctioned, slightly from last week's revised $1.36 billion.

Municipal bond market reads showed steady trading Friday.

The Municipal Market Data triple-A GO scale ended flat Friday. The 10-year yield was steady at 1.80% for the second straight session while the 30-year yield closed flat at 2.86% for the fourth straight session. The two-year closed at 0.34% for the tenth session.

The Municipal Market Advisors 5% coupon triple-A benchmark scale showed steady yields across the curve Friday. The 10-year yield and the 30-year yield were flat at 1.83% and 2.94%, respectively. The two-year closed unchanged at 0.35% for the tenth session.

Treasuries were slightly stronger Monday morning. The benchmark 10-year yield and the 30-year yield fell two basis points each to 1.95% and 3.16%, respectively. The two-year was steady at 0.27%.

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