The tax-exempt market continued to strengthen Tuesday morning after a firmer session Monday as munis regained footing ahead of a light new-issue calendar expected to hit the market.
"The market is up a bit," a New York trader said. "There are buyers."
Other traders said the market was not as strong as some think. "I think it's a bifurcated market," a Chicago trader said. "Institutional customer block sizes seem active which is giving the impression that there is decent activity. My perception is there was a tremendous amount of individual selling late last year and there is a decent amount of line item built up inventory and it's not necessarily trading like the more liquid institutional blocks. So I think it's a tale of two markets."
This Chicago trader said the short end and the long end of the market were stronger but the belly of the curve was steady. "The belly of the curve is not as strong. You really have be special in the 10-year to 25-year part of the curve."
In the primary market, Bank of America Merrill Lynch is expected to price $117.9 million of Oklahoma Municipal Power Authority power supply system revenue bonds, rated A by Standard & Poor's and Fitch Ratings.
In the competitive market, Ohio is expected to auction $219.3 million of general obligation bonds in two series, rated Aa1 by Moody's Investors Service and AA-plus by Standard & Poor's. The first series will be $150 million followed by $69.3 million.
On Monday, the Municipal Market Data scale finished a few basis points stronger. The 10-year and 30-year yields fell two basis points each to 1.78% and 2.87%, respectively. The two-year closed flat at 0.36% for the fourth consecutive session.
Treasuries were stronger Tuesday morning after a firmer session Monday. The benchmark 10-year yield and the 30-year yield fell three basis points each to 1.87% and 3.07%, respectively. The two-year yield dropped two basis points to 0.26%.