Puerto Rico was actively traded in the tax-exempt market Tuesday morning, even with a drop in overall volume and light trading of Chicago general obligation bonds following a three-notch downgrade by Fitch Ratings.

In one CUSIP of Puerto Rico 5.75s of 2041, over $20 million exchanged hands in Tuesday morning trading. Yields on a block-size interdealer trade yielded 8.2%, up from 8.1% on Friday. A customer bought from a dealer the same CUSIP at 8.18%, up from 8.10% on Friday. A customer sold to a dealer bonds yielding 8.2%, up from 8.12% on Friday.

Trading of Puerto Rico GOs was up 288.8% from the average of the previous five Tuesdays with over $30 million swapping hands.

Chicago — another credit that is suffering — saw less reaction in the secondary markets. Fitch lowered the rating of Chicago GOs by three notches to A-minus on Friday, citing unfunded pension liabilities. No institutional block-size trades of the GOs traded Tuesday morning.

The general market was quiet as traders slowly got back to work following a three-day Veterans Day holiday weekend. Volume was down nearly 40% at $1.13 billion from the average of the previous five Tuesdays. "It's a bit cheaper on the long-end," a Chicago trader said. "Outside 2018 it's two basis points weaker. In the general market, the yield curve keeps getting steeper and steeper."

In the primary market, several of the week's new issues priced for retail investors amid an overall drop in supply. The market can expected $5.04 billion in new deals, down from last week's revised $6.34 billion. The negotiated market can see $3.54 billion, down from last week's revised $5.13 billion. On the competitive calendar, $1.50 billion should be auctioned, up from last week's revised $1.21 billion.

M.R. Beal priced for retail $375 million of New York City Municipal Water Finance Authority water and sewer system second general resolution bonds, rated Aa2 by Moody's Investors Service and AA-plus by Standard & Poor's and Fitch.

The bonds yielded 4.78% with a 4.625% coupon and 4.67% with a 5% coupon in a split 2046 maturity. A portion of the bonds maturing in 2046 were not offered for retail. The bonds are callable at par in 2023.

On Friday, the triple-A Municipal Market Data scale ended as much as nine basis points weaker. The 10-year yield rose nine basis points to 2.58% and the 30-year yield rose seven basis points to 4.15%. The two-year was steady for the ninth session at 0.34%.

Yields on the Municipal Market Advisors benchmark scale rose as much as eight basis points. The 10-year yield increased seven basis points to 2.72% and the 30-year yield rose six basis points to 4.36%. The two-year yield increased one basis point to 0.49%.

The Treasury market also reopened weaker Tuesday morning following a three-day holiday weekend. The two-year and benchmark 10-year yield rose one basis point each to 0.33% and 2.76%, respectively. The 30-year yield increased two basis points to 3.86%.

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