The short-lived municipal rally that firmed yields last week continued to ebb on Tuesday as market participants awaited a Federal Reserve announcement on Wednesday. New issue bonds that came to the market provided some life to an otherwise soft market Tuesday afternoon, traders said.
"Munis have had a good rally but they're a little mixed today," one New York-based trader said. "With the Fed meeting tomorrow people are on their heels a little bit."
With a much smaller slate of new issue bonds compared with the $10.63 billion of sales last week, market participants are focusing on an upcoming Federal Open Market Committee announcement on Wednesday. It is expected that the Fed will slow its bond buyback program sometime within the next year.
"The market is not perfect but it's hanging in there with some new offers that are good," the trader said.
Several issues on the negotiated calendar this week top $100 million, including $289 million of Pennsylvania Economic Development Financing Authority parking revenue bonds, which Guggenheim Securities priced for institutions Tuesday morning.
The first series of bonds, $120 million of parking system revenue bonds, featured yields from 3.56% with a 5% coupon maturing in 2022 to 5.45% with a 5.25% coupon in 2044. The bonds, insured by Assured Guaranty Municipal Corp., have ratings of A2 by Moody's, AA-minus by S&P and BBB-minus by Fitch.
The second series, $99 million of junior lien parking revenue bonds, had yields from 1.35% with a 5% coupon in 2018 to 5.25% with a 6% coupon in 2053. Those bonds were rated A1 by Moody's and AA by S&P and Fitch.
The third series of $70 million junior lien parking revenue bonds were insured by AGM and had yields ranging from 0.70% with a 5% coupon maturing in 2016 to 4.61% with a 5.5% coupon in 2033. All series of bonds are callable at par in 2024.
Yields on the Municipal Market Data triple-A scale Monday were mixed throughout the curve, including as much as a one-basis-point rise in yields on bonds with maturities from 2041 to 2043. Those maturing in 2021 fell as much as a basis point. Yields on bonds in from 2020 remained steady, as did those maturing from 2022 to 2040.
The benchmark 10-year Treasury yield slid three basis points from Monday to 2.85%, while the 30-year and two-year yield fell two basis points to 3.88%. The two-year yield slipped a basis point to 0.32%.