Intermediate and long-term municipal bonds' three-day rally hit a wall Wednesday as the market prepared for the minutes from the Federal Open Market Committee's most recent meeting.
Yields steadied for 10-years or more after dropping since Friday morning, according to MMD data.
"The market is mainly waiting for the Fed minutes release," a trader in Virginia said. "Treasuries are weakening and I think munis are reacting to that."
From market close Thursday through Tuesday yields for 10-year bonds fell seven basis points to 2.48%, and the 30-year slid by nine basis points to 3.90% for, according to Municipal Market Advisors data. Yields fell one basis point on the 10-year and two on the 30-year on Tuesday.
Yields reacted to the employment situation report, which showed the March unemployment rate remained at 6.7%, and that while nonfarm payrolls had improved slightly from February they were lower than analysts had predicted.
"Last week the market was focused on economic data, especially Friday's numbers," a trader in North Carolina said. "From that perspective the numbers certainly did not hurt the market."
The report was some of the data that eased market participant's concern that the Fed would raise interest rates earlier than expected.
Investors' anxiety about an interest rate hike began on March 19 when Federal Reserve Chairwoman Janet Yellen said in a press conference the Fed might start raising interest rates six months after the end of QE3, which the market interpreted as in April 2015, sooner than analysts had predicted. Immediately after the press conference the short-end of the curve began selling-off.
"The market reacted quickly to an off-the-cuff comment," the trader in Virginia said.
The market was steadied after Yellen gave a speech in Chicago on March 31 saying that the Fed was not looking to raise interest rates anytime in the near-future.
"I think it's a bit uncertain when the Fed will decide to raise interest rates," the trader in Virginia said. "I feel like we've gotten mixed signals from the Fed recently. We got sort of a surprise from Yellen's press conference and, I don't want to say 'back-tracked,' but afterwards she softened her language."
Investors still expressed concern about Friday's employment situation report though, because Yellen also said the Fed would base its decision to raise interest rates based on economic data.
"The Fed minutes will offer insight to what Yellen and the Fed are thinking," the trader in Virginia said.
Barclays Capital Inc. brought $88.5 million of general obligation refunding and improvement bonds to the market Wednesday for the city of El Paso, Texas. The deal was originally expected at $100.4 million.
Yields ranged from 0.25% with a 4% coupon in 2016 to 4.10% with a 4% coupon in 2039. The 2015 maturity is selling by sealed bid. The bonds are callable at par in 2024 and received a AA rating from both Standard and Poor's and Fitch Ratings.
Wells Fargo Securities will issue $133.3 million of sales and use tax contractual obligations for the Metropolitan Transit Authority of Harris County, Texas. The bonds mature serially from 2015 through 2034 and are rated Aa2 by Moody's and AA-plus by S&P.
RBC Capital Markets will issue $100 million of first tier variable rate revenue refunding bonds for the North Texas Tollway Authority Wednesday. The bonds received an A2 rating from Moody's and an A-minus from S&P.
The Metropolitan Transportation Authority of New York will issue $500 million of transportation revenue bonds Thursday. A retail order period is scheduled to begin Wednesday. Wells Fargo is the lead underwriter and the bonds are rated A2 by Moody's, A-plus by S&P and A by Fitch.
The state of California will issue a two-part deal totaling $423 million of lease revenue bonds on Thursday, $265 million for the Judicial Counsel of California and $158 million for the North Kern State Prison.
A retail order period is scheduled to begin Wednesday. Siebert Brandford Shank & Co. is the lead underwriter and the bonds are rated A2 by Moody's and A-minus by both S&P and Fitch.
Treasury yields for the 10-year and 30-year each fell one basis point to 2.71% and 3.57%, respectively, since Tuesday's close. The two-year note held steady at 0.41%.
