NEW YORK – A fairly active morning in the tax-exempt market could lead to a dull afternoon as trading is expected to calm down before the holidays.
“We are seeing a little action,” said a trader in New York. “We were buying out of the chute but by 10AM, traders were already talking about lunch plans. So this could be over shortly.”
Munis were flat to a little weaker, according to the Municipal Market Data scale. Yields inside the five-year were steady, but yields outside the six year rose one basis point.
On Tuesday, the two-year yield closed flat at 0.36% for its tenth consecutive trading session. The 10-year muni yield closed flat at 1.92%, a record low as recorded by MMD, which was set Monday. The 30-year muni yield increased one basis point to 3.62%.
Treasuries were mixed. The 10-year yield was down while the two- and 30-year yields were up. The benchmark 10-year yield was down one basis point to 1.92%. The two-year and 30-year yields were up one basis point each to 0.27% and 2.94%, respectively.
In the primary market Wednesday, Rice Financial is expected to price $90 million of Jackson, Miss., Redevelopment Authority urban renewal revenue bonds.
On Tuesday, munis were able to hold their ground despite a big loss in Treasuries, forcing ratios to close lower. The five-year muni-to-Treasury closed at 105.8% from 113.8% on Monday. The 10-year ratio closed down at 100% on Tuesday from 106.7% on Monday. The 30-year muni-to-Treasury ratio closed down to 123.5% from 129.4%.
In economic news, existing home sales increased 4% in November to a seasonally adjusted 4.42 million units, the National Association of Realtors said. The November rate came after a downwardly revised 4.25 million units in October, a revision that was part of NAR’s benchmark revisions back to 2007. Economists expected 5.05 million sales that were expected by economists.
“The massive downward [benchmark] revisions – averaging 14% from 2007 – underscore that economic data can be unreliable,” said analysts at RDQ Economics. “As far as judging the current state of the housing market, we think these revisions have little impact. We do not see this report as changing the picture that levels of housing activity bottomed out in late 2010 to early 2011 and sales and construction activity is beginning to slowly improve.”
