NEW YORK – Traders gave off a sense of relief in the municipal market as supply next week is expected to be about half of what it was this week. Less supply should help the market continue to digest the large amount of new issues this week.
“Munis are pretty much based on the primary and with the big supply that came this week, people are just concerned about that,” a New Jersey trader said. “They are trying to get their sights on the new issues and put away bonds at new levels.”
He added the secondary market is quiet. “We were still heavy during the week but today is quiet.”
Looking to next week, the market will be helped by the smaller expected supply. “As time goes on and it gives retail more time to work on the issues that come, it will whittle it down.”
In other news, Harrisburg, Pa., announced it plans to skip its March 15 general obligation bond payment of $5.3 million. The New Jersey trader said the New York market has not been affected by the news.
The Municipal Market Data scale was not updated by press time. But Friday morning, munis were mixed. Yields inside four years were steady while the five- and seven-year yields were steady to one basis point higher. The eight- and nine-year yields were flat to one basis point lower. Yields outside 10 years were steady.
On Thursday, the two-year yield closed up one basis point to 0.27%, pulling off the record low of 0.26% it held since Feb. 16. The 10-year yield jumped two basis points to 2.05%, closing above 2.00% for the second time since Dec. 7. The 30-year yield rose one basis point to 3.31%.
Treasuries were weaker Friday afternoon. The benchmark 10-year yield and 30-year yield rose two basis points to 2.05% and 3.20%, respectively. The two-year was steady at 0.32%.
In the secondary market, trades reported by the Municipal Securities Rulemaking Board showed weakening over the past week.
Bonds from an interdealer trade of Pennsylvania Turnpike Commission 5s of 2034 yielded 2.02%, 10 basis points higher than where they traded a week before.
Bonds from an interdealer trade of Chicago 6.034s of 2042 yielded 5.63%, eight basis points higher than where they traded the previous week.
Bonds from an interdealer trade of New York Liberty Development Corp. 5s of 2044 yielded 4.31%, seven basis points higher than where they traded the previous week.
Bonds from an interdealer trade of Municipal Electric Authority of Georgia 7.055s of 2057 yielded 6.66%, five basis points higher than where they traded Wednesday.
Looking ahead to next week, the tax-exempt market can expect $5.81 billion in new issuance, down from this week’s revised $9.36 billion. In negotiated deals, $4.73 billion is expected, down from this week’s revised $7.36 billion. On the competitive calendar, $1.18 billion is expected to come to market, down by almost half from this week’s revised $2 billion.