Market Post: Munis See Quiet Start After 3-Day Weekend

The tax-exempt market struggled to clear away the cobwebs Tuesday morning as activity was slow to start.

After a three-day weekend, traders said the market was quiet as buyers awaited the majority of the week's primary issuance, expected to come Wednesday.

"It's quiet," a New York trader said. "It's just like a typical slow Monday."

In the primary market, most of the largest deals are expected to price Wednesday and Thursday.

Still, some deals should come Tuesday. Bank of America Merrill Lynch is expected to price for retail $106 million of taxable and tax-exempt Maine State Housing Authority mortgage purchase bonds, rated Aa1 by Moody's Investors Service and AA-plus by Standard & Poor's. Institutional pricing is expected Wednesday.

On Friday, the Municipal Market Data scale ended mostly steady. The 10-year and 30-year yields finished flat at 1.67% and 2.72%, respectively. The two-year finished steady at 0.33% for the fourth session.

Treasuries were weaker Tuesday morning after the long weekend. The benchmark 10-year yield and the 30-year yield rose three basis points each to 1.88% and 3.06%, respectively. The two-year was steady at 0.27%.

In economic news, existing home sales fell 1% to 4.94 million unit rate in December, falling short of economists' expectations of a 5.1 million-unit rate for December.

Overall, economists didn't appear to be too concerned. "A disappointing U.S. housing report but nothing to get worked up over," wrote Jennifer Lee, senior economist at BMO Capital Markets. "The growing economy and improving job market will continue to support the housing sector."

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