NEW YORK — An especially healthy primary calendar this week has the municipal bond market abuzz with anticipation, and questions.
Traders are wondering what kind of price discovery they’ll see from the customer side, a trader in Florida said.
“With that question in mind, and it being a typical Monday, more market discovery will take place tomorrow than today,” the trader said. “There’s enough cash out there to absorb the new issuance. Our customers have been extremely disciplined in putting that money to work.”
In the secondary market, a few dealers have been defending positions on a couple trades taking place at the back end of the curve, the trader said. The front end has been slow in getting going, he added.
Munis started the week steady across the curve, according to the Municipal Market Data scale.
The benchmark 10-year muni yield ended the week flat at 2.66% for the fourth straight day, 32 basis points beneath its average for 2011. The two-year yield maintained a 0.40% yield for a fourth consecutive day, its low for 2011.
The 30-year yield climbed two basis points to 4.32%, 30 basis points under its average for the year.
Treasury yields started the morning mixed, almost unchanged. The 10-year yield firmed one basis point to 2.90%.
The two-year yield weakened one basis point to 0.37%. The 30-year yield held steady at 4.25%.
The largest amount of new bonds seen in a week this year is expected to hit the primary market. New issues are expected to total $8.27 billion, versus a revised $5.71 billion last week.
Citi leads the long-term new-issue market, expecting to price $760 million of general obligation debt for New York City. The sale is expected to have a retail order period on Monday and Tuesday, and an institutional order period on Wednesday.
Over in the competitive market, Washington State is expected to issue about $742 million of GO bonds to be priced in three separate issues of $391 million, $28 million and $323 million.
The San Francisco Public Utilities Commission on Thursday is expected to competitively sell $700 million of bonds in two separate issues of $634 million and $66 million. Traders say that if the pricing is right, the market should have little difficulty in absorbing it, given the large amount of reinvestment money on the sidelines waiting to be put to work.
In economic news, the National Association of Home Builders/Wells Fargo Housing Market Index released Monday showed that builder confidence in the market for newly built, single-family homes rose two points to 15 for July. The index has held within a three-point range in nine of the past 10 months.
