Lacking powerful drivers, a range-bound municipal market continues to focus on the coming supply, leaving the secondary market in a sleepy state.
Market dynamics have remained consistent over the past two weeks or so, traders say. The coming U.S. elections and persistent issues in Europe have muni watchers' attention. But they also suppress appetites for finding bonds in the secondary, a trader in New York said.
"The market continues to be dominated by focus on the primary," he said. "In the secondary, the Street's not heavy. Most of the flows continue to flow to new issue product. Not a lot of bid-wanteds. Customers are still leery of selling, because they can't hit the gains. Roughly 60%-to-80% of these portfolios can't do anything with it. They'd like to sell bonds, but there's nothing to replace them with."
The primary market should see a total of $7.64 billion in supply this week. That compares with a revised $7.44 billion last week.
The number approximates the amount the market has been seeing lately. Industry watchers expect the market to absorb the volume with little difficulty.
The week's larger deals should start to appear today. A $550 million California GO refunding is expected to lead all issues Tuesday. It also ranks as the week's biggest competitive issue.
On the negotiated side, Wells Fargo is expected to price for retail $381.1 million of Indiana Finance Authority hospital revenue bonds for the Community Health Network Project.
Also, Siebert Brandford Shank & Co. should price $140.9 million of Metropolitan St. Louis Sewer District Wastewater System refunding revenue bonds. The deal priced for retail Monday. The bonds are rated Aa1 by Moody's Investors Service, AAA by Standard & Poor's and AA-plus by Fitch Ratings.
Yields in the retail order period ranged from 0.39% with a 3.00% coupon in 2015 to 2.75% priced at par in 2031. Credits maturing in 2025, 2026, 2028 through 2030, and from 2032 through 2034 were not offered to retail. The bonds are callable at par in 2022.
Munis ended Monday unchanged for a third consecutive session, according to the Municipal Market Data scale read. The benchmark 10-year yield held at 1.74%.
The 30-year yield steadied at 2.86%. The two-year remained at 0.30% for the 19th consecutive trading session.
Treasuries yields have started Tuesday's session stronger across the curve. The benchmark 10-year yield has fallen three basis points to 1.77%, roughly where it ended last week.
The 30-year yield has dropped four basis points to 2.92%. The two-year yield has slipped one basis point to 0.30%.