Light supply has kept municipal bond yields low even as Treasuries soften, traders said.
There were just $1.89 billion of bond sales this past week, according to Thomson Reuters data. The lack of new bonds enabled issuers this week to get low yields as the biggest deals were repriced.
"Treasury yields have crept up most of the week and munis have held firm and that's primarily because of the lack of supply," Howard Mackey, vice chairman at Rice Financial, said in an interview. "You can see evidence of that in the MTA financing, which came at fairly strong levels, and they even improved yields on repricing."
In the negotiated market, Morgan Stanley held institutional pricing Thursday for $400 million of Metropolitan Transportation Authority bonds after taking retail orders on Wednesday.
Yields on the MTA bonds offered Thursday fell by two to three basis points from retail pricing. Yields were 0.46% on 2%-coupon bonds maturing in 2015 and 4.16% with a 5.25% coupon in 2034.
Yields on the retail offer for the first series of $268.4 million of bonds ranged from 0.49% with a 2% coupon in 2016 to 4.58% with a 5% coupon in 2044. Bonds maturing next year were offered in a sealed bid, and all the bonds are callable at par in 2023.
In the second series of $131.6 million of bonds, yields ranged from 1.30% with a 4% coupon maturing in 2018 to 4.15% with a 5% coupon in 2032.
"That tells you there is a scarcity of specialty state paper in particular and that there is a lot of money out there," Mackey said. "Because of that, with the scarcity of product, it's caused muni yields to remain firm. I think you're going to see that little dichotomy between munis and Treasuries for a while."
Treasury yields were lower Friday morning, with the 30-year benchmark Treasury yield falling two basis points to 3.71%, while the 10-year also slid the same amount to 2.75%. The two-year lost one basis point to 0.33%.
