Yields in the municipal market have started Monday somewhat weaker as they search for traction.
The market expects a jolt from a larger new-issue calendar for the week. Out of the gate, market participants have been shaking loose the cobwebs as Treasury yields have moved higher.
"I'm not seeing anything out of the ordinary so far," a trader in New York said. "Right now, people are just sitting and getting things organized for themselves."
This week's volume should increase noticeably from the holiday week. The market expects potential volume to total $6.55 billion, up from sales of $652.2 million last week, according to Ipreo, The Bond Buyer and Thomson Reuters numbers.
That breaks down into $5.15 billion scheduled for negotiated sale and almost $1.40 billion in competitive sale.
Citi is expected to lead with issuance of $1.2 billion of New York Tobacco Settlement Financing Corporation bonds. That could change, though, if a roughly $2.2 billion issuance of Foothills Eastern Transportation Corridor Agency, to restructure bonds floated to build a toll road in Orange County, Calif., comes to market.
On Monday, Citi should price for retail $141 million Dekalb County, Ga., water and sewerage revenue refunding bonds, structured as serials and terms.
Demand, as measured by municipal bond mutual fund flows, continued to struggle for a 27th straight week. Outflows from muni bond funds totaled $870 million for the week of Nov. 27, Lipper FMI numbers showed. That compared with outflows of $770 million for the prior week.
Long-term muni bond funds figured among the bulk of the hemorrhaging, at $632 million, the ninth week of outflows. High-yield muni funds also suffered outflows of $191 million.
"It appears we have higher levels, just with Treasuries selling off and with the yields backing up," the trader said. "I'd imagine things will just drift cheaper today."
Muni yields started Monday's session weaker past the first six years of the curve by up to three basis points, according to the Municipal Market Data scale read. Maturities past 24 years have risen the most.
For the holiday-shortened week, the 10-year triple-A MMD yield fell one basis point to 2.65% and the 30-year yield dropped four basis points to 4.10%. The two-year was flat for the week at 0.33%.
Yields on the Municipal Market Advisors benchmark scale also ended last week firmer. The 10-year yield fell one basis point to 2.72% and the 30-year yield dropped three basis points to 4.34%. The two-year yield fell one basis point to 0.37%.
Treasuries started Monday weaker past the front end of the yield curve. The benchmark 10-year yield has increased three basis points to 2.78%. The 30-year has climbed two basis points to 3.84%. The two-year has held steady at 0.29%.
In economic news, the Institute for Supply Management reported Monday that the overall economy expanded for the 54th consecutive time. Simultaneously, the manufacturing sector swelled for the sixth straight month. The ISM index climbed to 57.3 in November from 56.4 in October, according to the monthly report on business. Economists polled by Thomson Reuters had expected the index to fall to 55.0.