NEW YORK — The municipal market opened slightly firmer Wednesday morning, as traders reported sellers seeing some bites on some of their offerings.
But as the morning pushed on, interest has dried up, though there are still offers in the secondary, a trader in Chicago said.
“A lot of guys are fishing,” he said. “They’ve got offerings out there and are looking for guys to give them bids, because no one’s taking bonds on the offer side right now. They were a little bit this morning, but they’ve kind of backed out.”
As Thursday is the first of the month, some rollover is expected, he added. But since new issuance the past couple of weeks has been sparse, those with inventory should see better prices Thursday, and hence, have little incentive to sell in Wednesday’s session.
“Guys aren’t excited to hit bids today,” the trader said. “They’re just watching.”
Tax-exempt yields started the day steady across the curve, according to the Municipal Market Data scale.
Treasury yields continue firm across the curve, following the path they took Tuesday. The 10-year benchmark yield, after dropping nine basis points by Tuesday’s close, has fallen four basis points to 2.15%.
The 30-year yield, after plunging nine basis points Tuesday, has decreased another three basis points to 3.50%. The two-year yield has ticked down one basis point to 0.20%, after slipping one basis point Tuesday.
Munis, on the other hand, at Tuesday’s close, saw the benchmark 10-year yield slip one basis point to 2.26%. The 30-year yield held steady at 3.89%.
The two-year yield remained at 0.30% for a 15th straight session, perched at its lowest level in more than 40 years.
As new issuance for the week before Labor Day typically is rather low, this week is not expected to be any different. According to industry estimates, municipal bond sales scheduled for this week should total a scant $1.2 billion, compared to a revised $4.4 billion last week.
The numbers for new issuance volume for the month of August stand at about $21 billion, through 900 deals. That number is down by 29.3% from the same month in 2010, when 1,218 deals came to market totaling $29.7 billion.
For the year, new issuance in the primary market is 38% lower at this point in the calendar year than it was over the same period in 2010. About $163.3 billion in new issuance has reached the market this year. That compares to $263.8 billion over the same period in 2010.
In economic news, the Institute for Supply Management-New York’s Report on Business current business conditions index indicated that New York City business activity contracted for the first time since 2009. The current business conditions index declined to 47.8 in August from 57.2 in July.
The report’s six-month outlook index decreased to 59.9 from 63.2. A reading higher than 50.0 represents an expansion in business activity.
In addition, the National Association of Purchasing Management-Chicago reported Wednesday that the Chicago Purchasing Managers’ Business Barometer slid to 56.5 in August from 58.8 in July. An index reading below 50 indicates a slowing economy, while a level above 50 suggests an economy that is expanding.
The data is compiled on a seasonally adjusted basis. Economists polled by Thomson Reuters estimated a 53.0 reading for the indicator.
