NEW YORK — There are more sellers than buyers of municipal bonds so far Wednesday, and that’s fueling an increase in yields across the curve.
One large bank has sent into the market an inordinate amount of bid-wanted lists, a trader in California said. “That’s put a little technical pressure on the supply in the secondary so prices are going down,” he said. “There’s a lot of selling today.”
The standard industry scales underreported the degree to which muni yields have been affected, he said. Where the scales reported a five-basis-point jump in yields Tuesday, it should have instead registered a 10-basis-point increase, he added.
“We went down hard yesterday, probably more than the scales would say,” he said. “It’s the same thing today.”
Tax-exempt yields, after a few stutter-steps Wednesday morning, are once again on the ascent. They are steady to two basis points higher out to three years, according to the Municipal Market Data scale.
Yields between four and 10 years are up one to nine basis points. Those from 11 years to 13 years are up two to seven basis points. And yields beyond 13 years are one to three basis points higher.
The 10-year muni yield jumped seven basis points on Tuesday to 2.09%. It erased entirely the rally that brought it to a record low of 1.97% late last week.
The 30-year yield climbed five basis points on the day to 3.52%, up eight basis points from its all-time low. The two-year yield remained at 0.32% for a ninth straight session.
Treasury yields are climbing, as well. The past two sessions they’ve seen rate increases that have reversed the incredible rally they saw at the intermediate and longer parts of the curve last week.
The benchmark 10-year Treasury yield has risen seven basis points to 2.06%. The two-year yield has ticked up to 0.26%.
The 30-year yield, which plunged as much as 53 basis points last week, has moved up six basis points to 3.08%.
“People are looking to get out of some bonds,” the trader said. “We’ve seen Treasuries turn, and trade off four or five basis points in the last two trading days. That’s put a little bit of pressure on us, even though munis are still pretty good value relative to other taxable stuff out there.”
The market anticipates a slight drop in new supply for this week, after a substantial increase in issuance last week. This week, the market expects an estimated $6.83 billion in new supply. Last week saw a revised $7.86 billion of volume.
In the negotiated space, Citi priced $407.9 million of Los Angeles Unified School District general obligation refunding bonds in two series. The bonds were rated Aa2 by Moody’s Investors Service and AA-minus by Standard & Poor’s.
Yields for the first series, 207 million, ranged from 0.57% with a 2.00% coupon in 2013 to 3.40% with a 5.00% coupon in 2024. Credits maturing in 2012 were offered in a sealed bid. There were no more orders for those maturing in split maturities in 2014, 2015, 2016, 2017, 2018, as well as in 2019 and 2021.
Yields for the second series, $200.9 million, ranged from 0.57% with a 2.00% coupon in 2013 to 3.21% with a 4.00% coupon in 2023. Credits maturing in 2012 were offered in a sealed bid.
