NEW YORK – The tax-exempt market should take direction from primary issuance Wednesday as Treasuries weaken and stocks surge on good news from Europe.
“We are certainly watching deals on the calendar and there is a lot of stuff coming up,” said a trader in Los Angeles. “In general, the tone feels better but the long bond is off today.”
He added there is “good interest” in deals. “Lower-rated deals seem to be coming in better than I might have thought. The higher-yield range has a stronger tone and is a buying opportunity to get yield.”
But overall, the market is still volatile. “Treasuries are going up and down and munis are staying flat,” he said. “So it’s volatile. Muni rates can’t go much lower and there is no demand for lower rates. So we’ll have to see how pricing does relative to Treasuries.”
Munis were mixed Wednesday morning, according to the Municipal Market Data scale, as munis were firming on the short end and weakening on the long end. Yields on five- to eight-year maturities fell up to two basis points while yields beyond the 20-year maturity rose up to three basis points.
On Tuesday, the two-year muni closed at 0.42% for its 19th consecutive trading session. The 10-year and 30-year closed flat at 2.22% and 3.79%, respectively.
Treasuries were weakening as the broader stock indexes surged over 3% in morning trading. The benchmark 10-year yield jumped six basis points to 2.07% while the 30-year yield increased seven basis points to 3.05%. The two-year remained flat at 0.27%.
The Dow Jones Industrial Average surged 3.52%, or 406.6 points, to 11,962.2.
In the primary market, Citi is expected to price for institutions $1 billion of Puerto Rico Sales Tax Financing Corp. sales tax revenue bonds. The credit is rated Aa2 by Moody’s Investors Service and AA-minus by Standard & Poor’s and Fitch Ratings. Citi Tuesday priced the bonds for retail.
JPMorgan is expected to price $700 million of New York Liberty Development Corp. liberty revenue bonds. The bonds have a provisional Aa2 rating from Moody’s.
Goldman, Sachs & Co. is expected to price for institutions $454 million Connecticut special tax obligation bonds. The bonds are rated Aa3 by Moody’s and AA by Standard & Poor’s and Fitch. Goldman Tuesday priced the deal for retail investors.
Ramirez & Co. is expected to price for institutions $483.7 million of New York’s Metropolitan Transportation Authority transportation revenue bonds. The bonds are rated A2 by Moody’s and A by Standard & Poor’s and Fitch. The deal was priced for retail investors Tuesday.
In the competitive market, Virginia Public School Authority will bring a $131.9 million refunding deal. Philadelphia will auction $173 million of short-term notes rated M1G-1 and SP-1-plus.
In economic news, pending home sales soared 10.4% to 93.3 in October, the National Association of Realtors said Wednesday. The surge comes after an unrevised 4.6% decrease to 84.5 in September.
The reading far exceeded expectations. Economists polled by Thomson Reuters predicted a 1.4% increase for the index.
