NEW YORK – The tone of the tax-exempt market was mixed Wednesday morning as some traders said the market is struggling with the $5 billion in new issuance in a holiday-shortened week while others said deals were being priced well and the market isn’t as weak as some believe.
A New York trader said while the Municipal Market Data scale showed cuts, munis “didn’t seem that weak.” There is also “very little activity” as traders wait for the bigger deals expected this week.
Munis were weaker Wednesday morning, according to the MMD scale. Yields inside six years were steady while yields on seven- and eight-year maturities rose up to two basis points. The nine- and 10-year yields jumped between two and four basis points. Outside 11 years, yields increased up to two basis points across the curve.
On Tuesday, the two-year yield was steady at 0.26%, its record low as recorded by MMD on Thursday. The previous record of 0.29% was set Feb. 7. The 10-year yield rose three basis points to 1.86% while the 30-year yield rose four basis points to 3.27%.
Treasuries were steady to firmer Wednesday morning as fears from Greece started to creep back into the market. The benchmark 10-year yield and the 30-year yield fell one basis point each to 2.04% and 3.18%. The two-year was steady at 0.31%.
In the negotiated market, Wells Fargo is expected to price $356.2 million of Virginia Public School Authority school financing bonds, rated Aa1 by Moody’s Investors Service and AA-plus by Standard & Poor’s and Fitch Ratings.
Bank of America Merrill Lynch is expected to price $324 million of San Francisco Airport Commission revenue bonds Wednesday. The bonds are rated A1 by Moody’s and A-plus by Fitch.
In the competitive market, Ohio is expected to auction $120 million of general obligation bonds, rated Aa1 by Moody’s and AA-plus by Standard & Poor’s and Fitch. Anchorage, Alaska, is also expected to auction $120 million of short-term notes, rated SP-1-plus by Standard & Poor’s.
Over the course of the past week, muni-to-Treasury ratios fell across the curve as munis outperformed and became more expensive. The five-year ratio fell to 75.6% on Friday, down from 82.5% the week prior. The 10-year muni-to-Treasury ratio dropped to 91% from 93.4% the week prior. The 30-year ratio fell to 102.2% from 104.8% last Friday.
The 10- to 30-year slope of the curve also fell over the course of the week, falling to 140 basis points from 143 basis points the week prior.
In economic news, existing home sales rose 4.3% in January to a seasonally adjusted 4.57 million-unit rate, the highest since May 2010. The increase fell short of the 4.65 million sales that economists had predicted.
