Slowly rising Treasury yields and modest activity are pulling muni yields higher as the day's trading session crossed the halfway point.
Traders remark that despite climbing yields on tax-exempts in industry gauges, the market appears to be holding its own, though difficult to read, a trader in Chicago said.
"The market is just hanging in there," he said. "It's hard to figure out; it doesn't seem to have a feel right now. It's like playing golf with ski gloves. We're waiting to see where some of this new issue stuff gets priced or where some of the demand is."
The Federal Reserve seems content to let Treasury yields drift, he added. Meanwhile, market participants have taken note of the struggling economy and the 70-basis-point jump in the 10-year Treasury yield, a large proportionate jump.
Muni ratios have been hovering around 100%, making munis still somewhat attractive assets compared to Treasuries and corporates, the trader said.
"I just get the sense that we're a little closer to a bottom, and maybe a little bit of a bounce, than people give us credit for," the trader said. "It may linger for a while."
Still, a busy primary market is expected for this week, led by an $877 million sale Morgan Stanley will hold for Rutgers University and an $800 million New York City Transitional Finance Authority financing, for which Loop Capital Markets Monday held a retail pricing.
The TFA bonds are rated Aa1 by Moody's Investors Service and triple-A by Standard & Poor's and Fitch Ratings. They are callable at par in 2023.
Yields range from 0.60% with coupons of 3.00% and 4.00% in a split maturity in 2016 to 4.10% with a 4.00% coupon in a split maturity in 2043. Credits maturing in 2015 were offered in a sealed bid. There were no retail orders for debt maturing in 2027, 2028, 2030 through 2032, 2038 and 2043. A second retail order period is expected Tuesday.
There should be approximately $7.87 billion of new issuance this week, according to Ipreo LLC and The Bond Buyer. That compares with the revised $4.52 billion that actually came to market last week, according to Thomson Reuters.
The muni market has mostly weakened crossing into the afternoon, according to an industry read. Yields up to two years were steady. Those in 2016 have risen one to three basis points. Beyond that, they are three to seven basis points higher.
Yields on the Municipal Market Data scale ended the week as much as six basis points higher. The triple-A 10-year yield rose two basis points to 2.13% and the 30-year yield leaped six basis points to 3.34%. The two-year was unchanged at 0.30% for the fifth session.
Muni yields on the Municipal Market Advisors 5% scale also closed out as much as six basis points higher. The 10-year yield climbed three basis points to 2.20% and the 30-year yield vaulted six basis points to 3.46%. The two-year held steady at 0.36% for the eighth session.
Treasuries continued to weaken in the early afternoon. The benchmark 10-year yield has leaped seven basis points to 2.23%; the 30-year yield has jumped six basis points to 3.38%. The two-year yield has inched up two basis points to 0.33%.