The municipal market earned a day of rest after its torrid week of buying and record-setting yields.

While the bond markets are closed for Veterans' Day, industry watchers are optimistic about investor demand and the overall solidity of the market.

Muni issuance, low for the season last week while issuers and underwriters returned to relatively normal operations following Hurricane Sandy, is expected to return to a moderate level in the holiday-shortened week.

Tax-exempt yields broke records in consecutive trading sessions last week at the 10- and 30-year parts of the curve, Municipal Market Data numbers showed. The benchmark 10-year AAA yield fell to a record low 1.57%. The 30-year fell to an all-time low of 2.66%. The two-year ended the week unchanged at 0.30% for the 32nd straight trading session.

For their part, Treasury yields ended Friday where they started. The benchmark 10-year yield and the 30-year yield held fast at 1.62% and 2.76%, respectively. The two-year was unchanged at 0.26%.

But the extremely low rates should not be perceived as a threat to the market’s health, given how the economy has been showing signs of recovery, said Chris Mier, a managing director at Loop Capital Markets.

“The market should make less of the fear factor for where the 10-year AAA and the 10-year Treasury is priced,” he said. “From a fundamental standpoint, rates should be a little higher. But rates will likely stay a little higher than where they are for the remainder of the year.”

Estimated municipal bond volume for this week should total $7.61 billion, up from $4.65 billion last week.

That breaks down into a negotiated calendar this week of an expected $6.63 billion, up from $3.69 billion sold last week. Bonds slated for competitive sale this week should total $984.6 million, up a sprig from $964.9 million sold last week.

JPMorgan should arrive with the week’s largest negotiated deal when it prices $853 million in Texas Transportation Commission Central Texas Turnpike System revenue refunding and put bonds in two series. The bonds are rated Baa1 by Moody’s Investors Service, A-minus by Standard & Poor’s, and BBB-plus by Fitch Ratings.

The first series involves $628 million of first tier revenue refunding bonds maturing in 2039 and 2041. The second series consists of $225 million of first tier revenue soft put bonds. The bonds should arrive Thursday.

Municipal bond mutual funds — often seen as a proxy for industry demand — saw heavy inflows, after experiencing their first week of outflows in more than six months.

Those funds that report their flows weekly saw inflows of $866 million for the week ended Nov. 7. That compares to outflows of $123 million from weekly reporting funds for the week ended Oct. 31.

Muni bond funds had seen 28 straight weeks of inflows before last week, when Hurricane Sandy arrived and pounded much of the Northeast coastline. And they’ve recorded inflows for 58 of the past 62 weeks.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.