NEW YORK — The weight of this week’s supply has been weakening the municipal market. The sell-off on the Street is orderly, however, a trader in California said.
Some of the syndicate deal balances remain. Thus, there are more deals trying to get done Thursday, he added. As yet, there has been very little activity in the secondary.
“Supply has created a weaker tone in the market,” the trader said. “And there’s not a large amount of retail reinvestment money in October. So, retail is not reinvesting, not as involved, and the market has slowed down as a result. We’re not seeing a tremendous amount of cuts in the secondary market equal to [Municipal Market Data] cuts. There are more deals out there trying to get done today.”
Tax-exempt yields are still rising early in Thursday’s session, particularly near the 10-year range, according to the Municipal Market Data scale. There is no read yet for yields up to three years.
Yields for four- to eight-year issues are up two to four basis points. From nine to 17 years, they’re six to 10 basis points higher. Beyond 17 years they’re two to seven basis points higher.
The 10-year muni yield surged 15 basis points Wednesday to 2.44%. It has risen 47 basis points from its record-low yield on Sept. 23 of 1.97%.
The 30-year yield jumped eight basis points to 3.62%. The two-year yield leapt what was, for it, an Olympian five basis points to 0.39%.
Treasury yields, which rose modestly Wednesday, continued on that path to start the day’s session. The benchmark 10-year Treasury yield increased four basis points to 1.93%.
The 30-year yield rose three five basis points to 2.89%. The two-year yield remained at 0.26%.
Muni yields saw very dramatic spikes Wednesday of 15 basis points for 10 years and 8 basis points for 30 years, MMD reported.
The last time the muni market witnessed similar rises in yield was Dec. 14, 2010, wrote MMD analyst Daniel Berger in a morning research post. On that date, muni yields in both the 10-year and 30-year ranges jumped 15 basis points.
“At that time, the market was doused in kerosene due to year-end volume and the impending expiration of [Build America Bonds],” Berger wrote.
In total, $8.26 billion of new issuance is expected this week. Last week, the market saw a revised $7.69 billion in new supply.
On the competitive side, Goldman, Sachs & Co. won $367.4 million North Carolina limited obligation refunding bonds. The deal was priced Wednesday, but prices were released Thursday.
The bonds were rated Aa1 by Moody’s Investors Service and AA-plus by Standard & Poor’s and Fitch Ratings. Yields ranged from 0.88% with a 4.00% coupon in 2014 to 3.13% with a 5.00% coupon in 2023.
In economic news, the Labor Department reported Thursday that initial jobless claims increased 6,000 to 401,000 on a seasonally adjusted basis for the week ending Oct. 1.
Continuing claims fell to 3.700 million for the week ending Sept. 24. The number marked the lowest level since July 30.
Economists polled by Thomson Reuters predicted 410,000 initial claims and 3.720 million continuing claims.
