NEW YORK — Low nominal yields, widening credit spreads, and stagnant names in the secondary are making for a sluggish municipal market thus far Wednesday.
“Everyone’s just tired of this market,” said a trader in California. “There’s nothing happening in the secondary. A lot of these customers are new-issue focused. Or, they’re looking for new names [in the secondary].”
Tax-exempt yields appear weaker across all but the front of the curve heading into Wednesday afternoon, according to the Municipal Market Data scale. Yields were steady through five years.
From 2016 through 2018, they were flat to three basis points lower. Yields for maturities beyond 2018 were one to four basis points lower.
The Treasury market is so far pointing the way for muni yields to inch upward. The 10-year benchmark yield is five basis points higher heading into the afternoon, at 2.20%.
The 30-year yield has climbed six basis points to 3.54%. The two-year yield has risen two basis points from Tuesday’s close to 0.24%.
On Tuesday, the 10-year muni yield rose four basis points to 2.19% after sitting at its all-time low for the prior three sessions. The 30-year muni yield skipped up two basis points to 3.82%. The two-year yield held at 0.30%, its lowest yield in more than 40 years.
New issuance has been light this week, and little help to traders and other market participants looking to it for direction. The industry estimates municipal bond sales of $3.65 billion versus a revised $4.72 billion last week.
In one of the larger negotiated deals of the week, E.J. De La Rosa priced more than $380 million of San Francisco Airport Commission bonds. Prices, though, were not available at press time.
JPMorgan priced $95 million of Indiana Finance Authority, Indianapolis Power & Light Company project bonds in two series. The bonds were rated A3 by Moody’s Investors Service, BBB by Standard & Poor’s, and BBB-plus by Fitch Ratings.
Both series, $55 million of environmental facilities revenue bonds and $40 million of environmental facilities refunding revenue bonds, are priced at par to yield 3.875% in 2021.
