After two days of firming municipal yields and falling treasuries, investors Wednesday began seeing the biggest wave of a heavy slate of new issue volume this week.
Municipal bonds largely maintained strength that was established earlier in the week, though some traders were dubious that yields would remain low throughout the day Wednesday as the Treasury Department prepares to auction notes.
“After Friday’s economic data, you’d think the government market would’ve gotten crushed, but we’re seeing nice flow today,” one trader in New York said in an interview. “We’re definitely seeing some buyer interest, seeing some flows, and there’s still a lot of money out there.”
The Bureau of Labor Statistics on Friday said the unemployment rate fell to 7.0%, or 0.25 point less than October’s number. The bureau also reported that the U.S. November employment picture was stronger than expected.
Another New York-based trader said new deals were highly anticipated but activity remained fairly flat early in the morning. Some participants may be selling ahead of a Treasury Department auction of $21 billion 9-year, 11-month 2¾% notes today, he said.
“If you have treasury supply coming into the market they’ll try to cheapen the market before they bid on the auction,” the trader said. “Treasuries are a bellwether for interest rates, if you have an auction and a large supply in the market, it impacts it negatively as people try to sell off.”
Total volume for the week is expected to reach $11.33 billion, up from $6.23 billion last week, Ipreo, The Bond Buyer and Thomson Reuters numbers show.
That includes a $1.6 billion Goldman, Sachs & Co.-led utility debt securitization tax-exempt bond issue for the Long Island Power Authority, a deal on which many traders were focused. The bonds are rated Aaa by Moody’s and AAA by Standard & Poor’s and Fitch.
Citigroup Global Markets also brought $1.6 billion of New York thruway authority junior indebtedness obligations for retail pricing Monday morning. The bonds were rated A3 by Moody’s, and A-minus by S&P.