After trailing rallying Treasuries on Monday, the municipal market geared up for new issuance Tuesday with traders hoping to see firming.
"It is not unusual for munis to lag Treasuries in either direction when yields move quickly," Janney Capital Markets said in a daily report Tuesday. "We expect munis to operate in catch up mode today, outperforming Treasuries."
The municipal market will have a decent amount of new money to work with this week, with issuance hovering around $5 billion, according to Thomson Reuters.
The biggest deal, $1 billion of Illinois general obligation bonds led by Citi, is set to price on Thursday. The deal is part of the state's ongoing $31 billion capital program known as Illinois Jobs Now.
Two major deals are expected to come to market Tuesday, including $733.1 million of Goldman, Sachs & Co.-led Texas Grand Parkway Transportation Corporation toll revenue refunding bond anticipation notes.
Barclays Capital Inc. is expected to hold a retail order period Tuesday for $315 million of University of Massachusetts Building Authority revenue bonds, and RBC Capital Markets is expected to bring $172.1 million of Fort Worth, Texas, water and sewer revenue bonds.
Yields on municipal bonds were as much as two basis points lower on maturities between 2020 and 2044, according to Municipal Market Data's 5% coupon read.
Treasuries rose Tuesday, as the 10-year benchmark yield climbed five basis points to 2.63%, while the 30-year moved to 3.58%. The two-year yield edged up two basis points to 0.32%.
