NEW YORK – After a wild ride between weakness and firming last week, the tax-exempt market is taking it slow Monday morning. Low issuance levels will help steady the tone this week, traders say.
“It seems to be very quiet this morning,” a New York trader said. “There are not a lot of new issues this week and not a lot out for bid for the moment. Bonds seem to be trading in line where they traded late Friday.”
However, munis were stronger for the fourth consecutive trading session Monday morning, according to the Municipal Market Data scale. Yields inside five years were steady while the six- and seven-year yields fell one basis point. The eight-year yield fell up to two basis points while the nine- to 11-year yields dropped between one and three basis points. Outside 12 years, yields were flat to one basis point lower.
On Friday, the two-year yield finished steady at 0.36%. The 10-year yield plummeted eight basis points to 2.17% while the 30-year yield fell two basis points to 3.40%.
Treasuries were weaker Monday morning. The benchmark 10-year yield rose three basis points to 2.27% while the 30-year yield jumped four basis points to 3.36%. The two-year was steady at 0.36%.
In primary deals, the tax-exempt market can expect $3.36 billion, down from last week’s revised $5.53 billion. In negotiated deals, $2.80 billion is expected to come to market, down from last week’s revised $4.24 billion. On the competitive calendar, $557.9 million is expected, down from last week’s revised $1.29 billion.
JPMorgan is expected to price $256.2 million of King County, Wash., sewer revenue and refunding and limited-tax general obligation refunding bonds.
The $132.5 million of sewer bonds are rated Aa2 by Moody’s Investors Service and AA-plus by Standard & Poor’s.
The $123.7 million of limited-tax refunding GOs are rated Aa1 by Moody’s and AAA by Standard & Poor’s.
Over the last week, muni-to-Treasury ratios rose as munis underperformed Treasuries and become comparatively cheaper. The five-year muni-to-Treasury ratio jumped to 93.6% from 84.7% the week prior. The 30-year ratio increased to 102.7% from 101.2% the week prior.
The 10-year ratio fell slightly to 96.9% on Friday from 98.7% the week prior as munis outperformed Treasuries and became comparatively more expensive.
The slope of the curve widened out to 123 basis points from 118 basis points the week before. Over the course of last week, the slope collapsed to a 12-month low of 114 basis points before widening.
