Market Post: Munis Slow as Blocks Look for Buyers

The tax-exempt market has slowed Wednesday morning as some larger accounts look to move block-sized paper with few takers.

Municipal bond yields are holding as Treasury yields rise. There is appetite for some of the competitive deals due to arrive on the day, a trader in New Jersey reported.

Mostly, though, the picture is murky, he said.

"The tone felt better yesterday," the trader said. "The market is sideways right now; it hard to get a read on it."

Investors anticipate a small calendar this week. Potential long-term volume is expected to total $1.79 billion, up from sales of $10.8 million last week. Some market analysts, though, anticipate the calendar will reach about $2.5 billion this week.

In the competitive market Wednesday, the New Jersey Educational Facilities Authority expects to auction $200 million of Princeton University revenue bonds. Meanwhile, Ohio plans to auction $150 million of infrastructure improvement general obligation bonds.

In the negotiated market, Bank of America Merrill Lynch expects to price $97.5 million of Columbus, Ohio, taxable and tax-exempt GOs.

There appears to be more out for the bid on the institutional side in the secondary market, the trader added.

"There are more customer offerings coming out of our accounts, blocks looking to move, more than we've seen for a while," he said. "There are some takers, but not a lot. It seems like the market's a little overbought. But who knows? It's that time of the year when you've got the January redemptions and people are looking for some bonds."

Yields on the Municipal Market Data triple-A scale started Wednesday steady across the curve.

Triple-A, tax-exempt yields ended Tuesday stronger past the front end of the curve. The 10-year triple-A tax-exempt yield fell three basis points Tuesday to 2.75%. The 30-year dipped two basis points to 4.17%, while the two-year yield remained at 0.34%.

The Municipal Market Advisors benchmark triple-A scale curve flattened as yields descended Tuesday by as much as six basis points. The 10-year triple-A yield slipped three basis points to 2.75%. The 30-year plunged six basis points to 4.34%, while the two-year held at 0.35%. Treasury yields have weakened to start Wednesday. The 10-year yield has climbed three basis points to 2.98%.

The 30-year has increased two basis points to 3.91%. The two-year yield has inched up one basis point to 0.42%.