The municipal bond market has steadied this week after a six-week selloff that pushed yields higher.
Munis traded mostly flat Tuesday morning after a steady session Monday. Traders said bonds in the primary market look more attractive than the secondary.
"There is a little steadiness in the market," a New Jersey trader said. "And it's still primary-market focused. New deals come at attractive levels and you can't beat it. The secondary is a little wishy-washy. Everything in the secondary is more expensive."
In the New York market, the primary was cheaper. New York City Municipal Water Finance Authority bonds priced for retail Monday and 4.25s of 2047 yielded 4.40%. In the secondary, New York City Transitional Finance Authority 4s of 2043 yielded 4.19%.
"It seems like the 4s at a discount are getting retail play because we haven't seen those levels in a while and the 2s and 3s were decimated," the trader said. "Most of the play is in the 4s or 4.5s."
Outside the primary market, the rest of the market appeared to slow as the Federal Open Market Committee kicked off its two-day meeting. "It seems to be slowing down a bit today," the trader said. "We are all waiting for [Fed Chairman] Ben Bernanke and a read on which way the taper is going to happen."
Later Tuesday, Citi is expected to price for institutions $368.7 million of New York City Municipal Water Finance Authority water and sewer system second general resolution revenue bonds. The bonds are rated Aa2 by Moody's Investors Service and AA-plus by Standard & Poor's and Fitch Ratings.
In retail pricing Monday, yields ranged from 3.42% with a 5% coupon in 2028 to 4.40% with a 4.25% coupon and 4.18% with a 5% coupon in a split 2047 maturity. Bonds maturing in 2039 were not offered for retail. The bonds are callable at par in 2023.
In the competitive market, New Mexico is expected to auction $200 million of revenue bonds, rated Aa1 by Moody's and AA by Standard & Poor's.
Monday, yields on the Municipal Market Data scale ended flat. The 10-year and 30-year yields were flat at 2.23% and 3.50%, respectively. The two-year was steady at 0.31% for the fourth session.
Muni yields on the Municipal Market Advisors 5% scale closed mostly flat. The 10-year and 30-year yields were steady at 2.33% and 3.62%, respectively. The two-year was flat at 0.38% for the second session.
Treasuries were slightly weaker Tuesday morning for the second session. The benchmark 10-year yield increased three basis points to 2.21%. The two-year and 30-year yields rose one basis point each to 0.28% and 3.37%, respectively.
In economic news, the consumer price index rose 0.1% in May while the core rate increased 0.2%.
"As expected, the headline CPI 12-month inflation rate rose from 1.1% in April to 1.4% in May, while the core inflation rate held steady at 1.7%," wrote economists at RDQ Economics. "We do not believe that the inflation data will stop the Fed from tapering bond purchases - probably beginning in September - and we think that April will prove to be the low point on inflation in 2013."
In other economic news, housing starts rose 6.8% to a seasonally adjusted rate of 914,000 in May. Housing permits in May fell 3.1% to an adjusted annual rate of 974,000. Housing starts were below the 950,000 expected by economists while permits came in line with the 975,000 expected.
"We are not concerned that the 28.8% annualized drop in single-family housing starts indicates a peaking out or downturn in residential construction activity," RDQ economists wrote. "Rising home prices and a potential realization by homebuyers that the bottom in mortgage rates may have been put in is a combination that is likely to boost home sales in the months ahead. In addition, we think the strength of the rental market continues to support multi-family starts. We expect the level of housing starts to sustain a move above one million units in the second half of the year."