NEW YORK – The tax-exempt market was quiet Tuesday morning ahead of a big new issue day in the primary.
“Munis are doing better today, but it’s still quite slow,” a New York trader said.
Munis were mostly steady Tuesday morning, according to the Municipal Market Data scale. Yields inside seven years were flat while yields out side eight years were flat to one basis point higher.
On Monday, the two-year yield closed steady at 0.27% for its third consecutive trading session, remaining one basis point above its record low. The 10-year yield dropped three basis points to 2.02% while the 30-year yield fell two basis points to 3.29%.
Treasuries were weaker Tuesday morning on positive economic news. The benchmark 10-year yield and the 30-year yield each jumped four basis points to 2.08% and 3.21%. The two-year yield rose one basis point to 0.34%.
In the primary Tuesday, Bank of America Merrill Lynch is expected to price for retail $750 million of New York State Thruway Authority bonds, rated AA by Standard & Poor’s and Fitch Ratings.
Ramirez & Co. is expected to price $500 million of Illinois general obligation bonds, rated A2 by Moody’s Investors Service.
Bank of America Merrill Lynch is expected to price for retail $206 million of Dormitory Authority of the State of New York bonds for New York University, rated Aa3 by Moody’s and AA-minus by Standard & Poor’s.
In the competitive market, Sioux Falls, S.D. plans to auction $95.7 million of revenue bonds.
On Monday, muni-to-Treasury ratios fell as munis outperformed Treasuries and became more expensive. The five-year ratio fell to 86.8% on Monday from 87.8% on Friday. The 10-year ratio moved down to 99.5% from 100.5%. The 30-year ratio held steady at 103.8%.
The 10- to 30-year slope of the curve rose slightly Monday to 127 basis points from 126 basis points on Friday. The slope is still down from the beginning of the year when it was 169 basis points.
In economic news, retail sales were up 1.1% in February after rising 0.6% in January. The gain was greater than the 1.0% increased expected by economists.
Excluding autos, retail sales were up 0.9% in February after climbing 1.1% in January. That February number also beat analyst expectation who had predicted a 0.7% gain.
“We believe that the consumer is in better shape than recent downbeat commentary from Fed Chairman Bernanke and some others on the FOMC might suggest,” wrote economists at RDQ Economics. “The gain in retail sales in February, the upward revisions to spending in December and January, and the strength of auto sales reported by manufacturers for February paint a much stronger picture for the consumer than the demand-side data a month ago were suggesting.”
