The municipal market is waiting for the week's primary issuance to arrive Tuesday and set a tone for yields.
Out of the gate, traders took note of a stronger start in the Treasury market and are hopeful. The backup in Treasury yields and default scares in Puerto Rico last week pushed munis higher; Treasury yields maintain a degree of pull for those of munis, a trader in New York said.
"For right now it's looking quiet," he said. "People are waiting for the new issues to come out to see where things are going. There's a little better tone with Treasuries this morning, which may help munis a little bit."
In lieu of any other economic indicators, market forces or technicals driving munis, the rumors of a possible default by the Puerto Rico Highways and Transportation Authority has the market on edge, to a degree.
"People are still trying to figure Puerto Rico out, based on possibility of the highway [authority] defaulting," he said. "There's still a little bit of uncertainty in the marketplace in regards to that, as well."
After Monday's relatively inactive session, market participants anticipate the week's coming deals, some of which are scheduled to price Tuesday, to set a more discernible tone.
Volume continues to be slight compared to this time last year. This week, $6.45 billion is expected to reach the market, which represents an increase from last week's revised $5.24 billion.
The industry expects to see $5.05 billion in negotiated deals, up from last week's revised $3.27 billion. On the competitive calendar, $1.40 billion should be auctioned, a decline from last week's revised $1.97 billion.
There aren't any deals slated to weigh in at more than $400 million, though. A deal consisting of airport revenue improvement bonds for Dallas-Fort Worth International Airport, at $366.0 million, leads the way.
Some of the week's larger deals should arrive Tuesday. Bank of America Merrill Lynch will be the lead underwriter on one of those. The bank is expected to price $344.4 million of Los Angeles wastewater system subordinate revenue bonds. The bonds are rated Aa3 by Moody's Investors Service and AA by Standard & Poor's and Fitch Ratings.
The muni market has started the day's session steady across the curve, according one market scale.
On Monday, yields on the Municipal Market Data triple-A GO scale finished one to two basis points higher. The two-year and the 10-year yields held steady at 0.28% and 1.81%, respectively. The 30-year yield ticked up two basis points 2.95%.
Yields on the Municipal Market Advisors 5% scale ended Monday slightly higher. The 10-year and 30-year yields inched up one basis point each to 1.86% and 3.07%, respectively, on Monday. The two-year yield remained unchanged at 0.33%.
Treasury yields started Tuesday stronger across the curve. The benchmark 10-year yield decreased three basis points to 1.90%.
The 30-year yield also slipped two basis points, to 3.11%, after vaulting 11 basis points on Friday. The two-year yield ticked down one basis point to 0.24%.