NEW YORK – The largest week of new issuance so far this year is well underway as traders said there is a spurt of buying in both the primary and secondary markets.
“I am seeing buyers in the secondary,” a New York trader said. “And I guess new deals in the primary are going very well.”
Munis were steady across the board Tuesday morning, according to the Municipal Market Data scale.
On Monday, the two-year yield ended steady at 0.26%, its record low as recorded by MMD on Feb. 16. The 10-year and the 30-year yields fell two basis points each to 1.85% and 3.23%, respectively.
Treasuries continued to strengthen for their fifth consecutive trading session. The benchmark 10-year and the 30-year yields fell two basis points each to 1.91% and 3.03%, respectively. The two-year was steady at 0.29%.
In the primary market, JPMorgan is expected to price for retail $2 billion of California various purpose general obligation refunding bonds, rated A1 by Moody’s Investors Service and A-minus by Standard & Poor’s and Fitch Ratings.
RBC Capital Markets is expected to price $350 million of California Department of Water Resources Central Valley Water Project System revenue bonds in three series, rated Aa1 by Moody’s and AAA by Standard and Poor’s.
Bank of America Merrill Lynch is expected to price for institutions $138.8 million of Maine Turnpike Authority revenue bonds following a retail order period Monday. The bonds are rated Aa3 by Moody’s and AA-minus by Standard & Poor’s and Fitch.
In the competitive market, Washington is expected to auction $534.7 million of GOs in two pricings of $346.1 million and $188.6 million. The credit is rated Aa1 by Moody’s and AA-plus by Standard & Poor’s.
Dekalb County, Ga., is expected to auction $157 million of short-term tax anticipation notes, rated M1G-1 by Moody’s.
On Monday, muni-to-Treasury ratios rose as munis underperformed Treasuries and became cheaper. The five-year ratio increased to 81% on Monday from 75.6% on Friday. The 10-year ratio jumped to 96.4% from 94.4%. The 30-year muni-to-Treasury ratio increased to 106.2% from 104.8% last week.
In economic news, durable goods orders fell 4% in January, or $8.6 billion, to $206.1 billion, the largest drop since January 2009 when new orders fell 13.2%. The drop came after an upwardly revised 3.2% rise in December, the Commerce Department said.
The fall was much larger than the 1% drop economists had expected.
“While this is a weak report it is very much at odds with the nine-month high on ISM manufacturing new orders in January and the 0.7% increase in manufactured production in the month,” wrote economists at RDQ Economics. “Since durable goods orders can be very volatile, capital goods orders – which are one third of total durable goods orders – appear to be affected by a major seasonal adjustment problem in the first month of a quarter, and given that regional manufacturing surveys have generally pointed to a further strengthening in factory activity in February, we do not believe that order growth weakened at the start of 2012.”