NEW YORK — As the week’s deals roll in Wednesday, the municipal bond market is seeing some price discovery. The secondary market, meanwhile, has been mostly quiet to let the industry digest the new volume.
“The deals are going well,” a trader in California said. “But there’s a tendency for a little bit of selling in the secondary to pay for those deals, so things slow down a little bit.”
Tax-exempt yields, after holding steady for three days, appear weaker Wednesday, according to the Municipal Market Data scale. There is no reading yet for the very front end of the curve. Maturities three years and out are flat to two basis points higher.
“Munis have held in the last couple of days relative to Treasuries,” the trader said. “There’s a bit of capitulation on that today, where we see the long end off a couple of basis points.”
Once again, there was nothing new with the benchmark 10-year yield Tuesday. It held at a record low of 2.07%, as measured by MMD.
The 30-year yield remained unchanged at 3.66% for a third session, its lowest level in at least three decades. The two-year yield stayed at 0.30% for a 24th consecutive session, spinning its wheels at its lowest level in more than 40 years.
Treasury yields moved into the afternoon slightly weaker, for the most part. The 10-year benchmark yield has ticked up two basis points to 2.01%, crossing almost a psychological barrier at 2.00%. Though higher, it’s still near a range it hasn’t seen in roughly five decades.
The 30-year yield has inched up one basis point to 3.34%. The two-year yield has fallen two basis points to 0.19%.
Volume in the primary is expected to rise from last week’s scant supply. Industry estimates place new issuance for this week at $4.65 billion, not including $5.4 billion of California revenue anticipation notes. Estimates for last week’s volume were revised downward to $1.95 billion.
The negotiated side of the primary market showed signs of buyer reluctance, which started late yesterday, MMD analyst Randy Smolik wrote in a research post. “Negotiated primary showed concession to attract buyers as well,” he wrote.
In the negotiated market Wednesday, Barclays Capital priced $430.5 million of California State University Trustees system-wide revenue bonds.
The bonds are rated Aa2 by Moody’s Investors Service and A-plus by Standard & Poor’s.
Yields range from 0.32% with a 2.00% coupon in 2012 to 4.60% with a 5.00% coupon in 2042. There were no more offers taken for credits maturing from 2012 through 2019, as well as for one half of split maturities in 2020, 2021, 2022, 2027, and 2031.
Also, JPMorgan priced $150 million of Indiana Finance Authority lease appropriation bonds in two series. The bonds were rated Aa2 by Moody’s and AA-plus by Standard & Poor’s and Fitch Ratings.
Credits for the $70 million first series were priced to the SIFMA Swap index plus 49 basis points in 2035. Credits for the $80 million second series were also priced to the SIFMA Swap index plus 49 basis points in 2035.
