The tax-exempt market struggled to get going Tuesday morning after a three-day weekend as traders said the market was barely alive.
"There is nothing going on," a New York trader said. "It's too early. There has barely been a trade all morning."
Indeed, the new issue market set a slow tone for the week. About $1.89 billion in municipal bonds are expected to be issued, down slightly from last week's revised $2.18 billion. On the negotiated calendar, $1.38 billion is expected to be priced, down from last week's revised $1.84 billion. In competitive deals, $506.7 million is expected to be auctioned, up from last week's revised $339.9 million.
On Friday, the 10-year Municipal Market Data yield and the 30-year yield closed steady at 1.74% and 2.89%, respectively. The two-year closed at 0.29% for the 27th consecutive session.
Treasuries were stronger Tuesday morning after also strengthening Friday. The benchmark 10-year yield and the 30-year yield fell one basis point each to 1.56% and 2.67%, respectively. The two-year was steady at 0.23%.
Treasuries were buoyed by poor economic data. The ISM index came in at 49.6 in August, slipping from the 49.8 reading in July.
"According to this survey, manufacturing activity contracted at a modest rate for the third consecutive month in August as weak global manufacturing markets continued to weigh on activity," wrote economists at RDQ Economics. "However, the details of the report were weaker than the headline index. Specifically, new orders fell further and production contracted while inventory levels rose. Within the construction of the ISM index, rising inventory levels offset declining production but clearly this is a more negative mix for the outlook for manufacturing."