The market opened quietly on Monday as it prepared the biggest week of issuance so far this year, with upward of $11 billion predicted by Ipreo and The Bond Buyer.
The bulk of this week's issuance comes from the commonwealth of Puerto Rico, which plans a $3 billion general obligation bond sale Tuesday, and California, which expects to sell $1.6 billion of GOs Thursday.
Traders said the market opened slowly, with the largest negotiated deal a mere $24.03 million issued by Redwoods Community College District and the biggest competitive deal $21 million of Tulsa, Okla., school district bonds
"It is quiet today, but I think it should be a busy week with the California, Chicago, and Puerto Rico deals," said a trader based in the Northeast.
While the Puerto Rico deal is the largest of the week, market participants said it will likely attract non-traditional muni buyers.
"What I've heard is [the commonwealth] is marketing this issuance to funds that would purchase a minimum of $50 million," Daniel Berger, senior market strategist at Thomson Reuters, said in an interview. "It is targeting institutional investors and more sophisticated investors, including hedge funds and crossover buyers. I don't think this issuance will attract traditional municipal bond buyers or a lot of retail investors, though this is pure speculation."
The week's other largest negotiated sales, including $830 million of New York Dormitory Authority bonds, are scheduled to hit the market on Wednesday. Citigroup Global Markets will bring the deal, $800 million of tax-exempt and $30 million of taxable bonds, which is rated AAA by Standard & Poor's and AA by Fitch Ratings.
Municipal bond yields measured by Municipal Market Data's AAA scale jumped as much as two basis points on bonds maturing in 2016 to 2020, while those maturing outside that range were stable.
Treasury yields have firmed since Friday, with the 30-year and 10-year bonds sliding one basis point each to 3.72%, and 2.79%, respectively. Two-year notes gained one basis point to 0.39%.
