The tax-exempt market was steady to slightly firmer Wednesday morning, but traders said activity in the market was still very slow.
"The market seems OK," a New Jersey trader said. "Treasuries are off a little but munis don't want to go down. It's still relatively firm. Maybe flat from yesterday or maybe even in pocket areas up one basis point."
He added some traders are forcing trades because there hasn't been a lot of movement over the last week and they are trying to move bonds. "But it's few and far between," he said. "So it's a grind. Overall the market is sideways to firmer a touch."
Although Treasuries are off, munis are being driven by supply and demand factors. "There is limited supply. It's the same names over and over again so people are trying to look for new products to come in. And when you get a new offering, you're looking at it aggressively, but the stale stuff in the market is still sitting there," the trader said.
Going forward, the trader said he expects it to remain fairly light through election season. It should be relatively light and then issuers will cram it all in at the end of the year."
In the primary market, Morgan Stanley is expected to price $161.3 million of city of Chula Vista, Calif., industrial development revenue refunding bonds for the San Diego Gas and Electric Company 2006 Series A bonds, rated Aa3 by Moody's Investors Service, A-plus by Standard & Poor's, and AA-minus by Fitch Ratings.
JPMorgan is expected to sell an additional $75 million of 2004 Series F bonds, subject to the alternative minimum tax, for the same issuer. The bonds hold the same ratings.
In the competitive market, the Florida Board of Education is expected to auction $233.285 million of public education capital outlay refunding bonds, rated Aa1 by Moody's and AAA by Standard & Poor's and Fitch.
On Tuesday, the 10-year Municipal Market Data yield fell one basis point to 1.73%. The 30-year yield closed steady for the third session at 2.89% and the two-year closed at 0.29% for the 28th consecutive session.
The 10-year yield now remains only 13 basis points above its record low of 1.60% set July 26. The 30-year trades only 10 basis points above the 2.79% record low set July 25.
Treasuries were weaker. The two-year yield rose one basis point to 0.25% while the 30-year yield jumped two basis points to 2.70%. The benchmark 10-year was steady at 1.58%.