Market Post: Munis Trade Sideways, Focus on Primary

The tax-exempt market traded steady to slightly weaker Tuesday morning as an overall risk-on trade pushed bonds lower while the Dow Jones Industrial Average traded at a record high level.

Still, the muni market was focused on supply and demand factors and buyers waited for deals in the primary to sell.

"It's a little sideways to flat," a New Jersey trader said. "It's a struggle in the secondary. The primary has been the focus of the market so secondary volume has been light. We are getting some trading done today but it's sporadic and a little softer."

In the primary market Tuesday, Citi is expected to price for retail $400 million of Connecticut general obligation bonds, rated Aa3 by Moody's Investors Service and AA by Standard & Poor's and Fitch Ratings. Institutional pricing is expected Wednesday.

Bank of America Merrill Lynch is expected to price $286.5 million of Regents of the University of California taxable fixed rated notes, rated Aa1 by Moody's, AA by Standard & Poor's, and AA-plus by Fitch.

JPMorgan should price $219.8 million of Fulton County, Ga., water and sewerage revenue refunding bonds, rated Aa3 by Moody's and AA-minus by Standard & Poor's and Fitch.

In the competitive market, Lower Colorado River Authority in Texas is expected to auction $308 million of revenue bonds, rated A2 by Moody's, A by Standard & Poor's, and A-plus by Fitch.

On Monday, municipal bond market scales ended steady to one basis point weaker.

Yields on the Municipal Market Data triple-A GO scale ended as much as one basis point higher. The 10-year yield and the 30-year yield rose one basis point each to 1.79% and 2.91%, respectively. The two-year closed at 0.31% for the 10th straight session.

Yields on the Municipal Market Advisors 5% coupon triple-A benchmark scale closed as much as one basis point higher. The 10-year and the 30-year yield ended flat at 1.82% and 2.98%, respectively. The two-year was steady at 0.33% for the fifth session.

Treasuries were weaker as the Dow Jones Industrial Average traded at a record high level. The benchmark 10-year yield jumped three basis points to 1.90% while the 30-year yield rose two basis points to 3.11%. The two-year was steady at 0.25%.

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