NEW YORK – After handling last week’s large new-issue calendar, municipal investors are facing an even bigger week ahead. The tax-exempt market is quiet Monday morning ahead of pricings.
“Munis are pretty quiet ahead of the week’s deals,” a Florida trader said. “We started to see price stabilization on Friday. Buyers who didn’t get what they wanted stepped in a little on Friday. But munis are quiet this morning and most of the reaction we see from customers is they want to see how deals are priced and see structuring of coupons and from that point, it’s a wait and see attitude.”
He added that the structure of the coupon depends on the large mix of buyers. “Insurance companies still want 4s called inside 10 years. A handful won’t take anything smaller than a 5% coupon, but small separate managed accounts will take inside 3% coupons with a call of 10 years.”
Last week, deals were done and bumped on Tuesday and Wednesday, the trader said. Deals struggled to get done on Wednesday and Thursday and underwriters went back to the variety of accounts to try to satisfy everyone. “We could see more of that this week,” he said.
Munis were steady to slightly weaker Monday morning, according to the Municipal Market Data scale. Yields inside 10 years were steady while 11- to 22-year yields rose one basis point. Outside 23 years, yields were flat.
On Friday, the two-year yield ended at 0.26%, its record low first recorded by MMD on Feb. 16. The 10-year yield ended at 1.91% and the 30-year closed at 3.27%.
The Treasury curve flattened. The two-year yield rose two basis points to 0.30% while the 30-year yield fell one basis point to 3.11%. The benchmark 10-year was steady at 1.99%.
In the primary market this week, $8.85 billion is expected to come to market, according to Bond Buyer estimates. In the negotiated market, $6.61 billion is expected, up from last week’s revised $3.56 billion. On the competitive calendar, $2.23 billion is expected, up from last week’s revised $1.88 billion.
On Friday, Bank of America Merrill Lynch priced for retail $150 million of Maryland general obligation bonds, rated triple-A by the three big rating agencies. Institutional pricing is expected Tuesday. Pricing details were not available.
M.R. Beal & Co. is expected to price for retail $502.2 million of New York City Municipal Water Finance Authority water and sewer system second general resolution revenue bonds. The credit is rated Aa2 by Moody’s Investors Service and AA-plus by Standard & Poor’s and Fitch Ratings.
Citi is expected to price $100 million of Vermont general obligation bonds, rated AAA by Moody’s and Fitch and AA-plus by Standard & Poor’s.