The tax-exempt market continued to trade steady with muted activity Monday afternoon as traders said they waited for primary issuance to price later in the week.
“It’s very quiet,” a Los Angeles trader said. “There is over $9.5 billion coming so people are sitting and waiting.”
While supply is the largest in recent weeks, the trader said the market should absorb it well. “People are flush with cash so the high supply can be absorbed well.”
But in the meantime, traders are sitting on their hands. Treasuries are firmer, but munis aren’t following prices higher. “I’m hoping the scale will bounce back a little from Thursday and yields go down because I need to sell,” the trader said. “People are trying to clean up the books because they want to get into new issues this week. But I don’t see any adjustments to the scale.”
The primary market was slow Monday as most of the deals are expected to price later this week. The biggest deal Monday came in the competitive market with Citi winning the bid for $69.53 million of King County, Wash., general obligation bonds. The credit is rated Aa1 by Moody’s Investors Service, AAA by Standard & Poor’s, and AA-plus by Fitch Ratings. Pricing details were not available by press time.
On Friday, the 10-year Municipal Market Data yield jumped nine basis points to 1.93% while the 30-year yield soared eight basis points to 3.06%. The two-year closed at 0.29% for the 36th consecutive session.
The 10-year MMD yield is now the highest since April 17, when it yielded 1.95%. The 30-year yield is the highest since July 10 when it touched 3.06%
Treasuries continued to strengthen Monday afternoon after a selloff last week when the Fed announced QE3. The benchmark 10-year yield dropped four basis points to 1.83% while the 30-year yield plunged six basis points to 3.03%. The two-year was steady at 0.26%.