Municipal market participants foresee mostly a quiet Friday, in anticipation of a growing calendar projected to arrive next week.
With modest pickings in the secondary market, muni investors since Thursday have turned their eyes toward new paper, a trader in New York said.
"We're expecting a sideways day today with munis," he said. "Even though the beginning of this week was pretty quiet, with the building calendar indicated over the last 24 hours for next week, it'll have people sitting tight for the remainder of the week."
Total potential muni volume for next week should total $8.25 billion, up from total sales of $4.39 billion this week, per Ipreo, The Bond Buyer and Thomson Reuters numbers.
This breaks down to $5.67 billion of negotiated sales next week, versus a revised $3.77 billion sold this week. In addition, $2.59 billion of bonds are scheduled for competitive sale next week total, compared with $620.0 million this week.
The market expects a substantial jump in volume for the short term. The Bond Buyer's most recent 30-day visible supply showed $12.4 billion on the horizon.
Several large deals have begun to materialize, including competitive and negotiated general obligation offerings from Pennsylvania, Minnesota and California, as well as credits from the New York City Transitional Finance Authority.
More refundings could emerge, as well.
"A lot of the secondary stuff has been pretty lean; inventories have been lean," the trader said. "Things have been pretty stale in the secondary offerings. People are just going to save their powder for the new issuance next week."
Since Thursday, fixed-income markets have received a jolt. Late Wednesday, the economy staved off what many in the financial markets predicted would be an unmitigated disaster when it approved a spending measure. The move ended the deadlock between Democrats and Republicans, returned federal workers to their jobs for the first time this month and ensured the federal government would not default on its debt obligations, at least until the early part of 2014.
Bond market investors, noticeably in Treasuries, have pounced on the relative calm and clearer short-term picture to buy paper, traders said. In particular for the muni market, non-traditional investors have swiftly moved in on Puerto Rico credits, traders said.
Yields on bonds from commonwealth issuers fell as much as 25 basis points Thursday, they added.
"It's definitely the hedge-fund-type buyers," the trader in New York said. "I wouldn't think that it's the typical, traditional muni players at this point."
At press time, tax-exempt yields on the triple-A Municipal Market Data scale had yet to be updated.
On Thursday, The 10-year yield fell three basis points to 2.62%. The 30-year decreased four basis points to 4.22%. The two-year held steady at 0.35% for the fifth straight session.
Yields on the Municipal Market Advisors benchmark scale closed the day as much as four basis points lower. The 10-year yield fell two basis points to 2.76% while the 30-year yield tumbled four basis points to 4.35%. The two-year held at 0.55% for the seventh consecutive session.
Treasury yields have picked up Friday morning where they left off Thursday as their downward trajectory, driven mostly by Congress' temporary resolution to the debt-ceiling crisis, continued.
The benchmark 10-year and the two-year yields have each ticked down one basis point to 2.58% and 0.32%, respectively. The 30-year yield has slipped two basis points to 3.65%.