NEW YORK – The tax-exempt primary market is slow, but that isn’t stopping traders from making moves in the secondary.
“It’s quiet but firm,” said a trader in Atlanta. “It seems like there is a little activity in the secondary. Obviously it is a light new issue week but people at least are getting stuff done.”
He added there was a “decent bid list and enough activity to stay at your desk today.”
Munis were flat to slightly higher in Monday early afternoon trading, according to Municipal Market Data scale. Yields inside the three year were flat while yields on the four- and five-year fell two basis points. The six- to eight-year maturities were flat but yields beyond that fell one basis point.
Last Friday, yields finished lower. The 10-year muni yield fell one basis point to 1.93%, a level not previously recorded. The 30-year yield fell one basis point to 3.62%. The two-year yield held steady at 0.36%.
Treasuries continued to strengthen in afternoon trading. The benchmark 10-year yield fell one basis point to 1.84% while the 30-year yield fell three basis points to 2.83%. The two-year yield was flat at 0.24%.
In the primary market this week, $905.3 million of new issuance is expected, including $365.5 million in negotiated deals and $539.8 million in competitive sales.
On Monday, the biggest deal came in the competitive market. JPMorgan won the bid for $94.7 million of Collier County, Fla., special obligation refunding revenue bonds. The credit is rated AA by Standard & Poor’s. Pricing information was not available by press time.
In the negotiated market Monday, RBC Capital Markets priced the one of the biggest deals, $20 million of Cleveland Municipal School District school improvement refunding bonds. The credit is rated AA by Fitch Ratings. Details were not available.
Looking forward to Tuesday, Massachusetts is expected to issue $400 million of general obligation bonds, followed by Suffolk County, N.Y., issuing $300 million of short term notes. Suffolk County is expected to issue an additional $100 million of short term notes on Wednesday.
Muni-to-Treasury ratios are up for the week. Last Friday, the five-year muni-to-Treasury ratio increased to 114.8% from 110.5% the week earlier. The 10-year muni-to-Treasury ratio increased to 104.3% from 97.5% and the 30-year ratio increased to 127% from 121% from the week prior.
“Buoyancy in Treasuries provides an easy backdrop for a firm muni secondary,” said MMD’s Randy Smolik. “Attractive ratios to Treasuries kept this asset class a recommended investment by pundits. But, the holiday period creates a drag on performance. Trading has looked steady while finding two-side markets seemed limited.”
