A weaker secondary and rising Treasuries have pushed tax-exempt yields higher Thursday.
Heading into the afternoon, buoyant Treasury yields are dragging munis higher from the belly of the curve on out, traders say. Volatility and uncertainty in Europe have the equities markets sputtering Thursday.
Traders say yields look weaker on the day. One market gauge has triple-A yields up to three basis points higher on the curve beyond two years.
"The market is a little weaker," a trader in New Jersey said. "We're involved in a couple of smaller deals today where we saw price changes actually adjust yields a few basis points higher to get deals done. That would probably be a somewhat common theme today."
The primary market expects supply to total $7.64 billion this week. That compares with a revised $7.44 billion last week.
The number approximates the amount the market has been seeing lately. With most of the week's tax-exempt supply already arrived, industry watchers say the market has been absorbing the volume with little difficulty.
On the negotiated side Thursday, Bank of America Merrill Lynch priced $579.4 million of Honolulu city and county general obligation bonds in three series. The bonds are rated Aa1 by Moody's Investors Service and AA-plus by Fitch Ratings.
Yields in the first series, $255.5 million, range from 0.84% with a 5.00% coupon in 2017 to 3.25% with a 4.00% coupon in 2037.
Yields in the second series, $291.2 million, range from 0.65% with a 5.00% coupon in 2016 through 2.64% with a 4.50% coupon and 2.99% with a 3.00% coupon in a split maturity in 2029.
Yields in the third series, $32.7 million, range from 0.42% with a 2.00% coupon in 2014 to 2.84% with a 2.75% coupon in 2027. The bonds in all three series are callable at par in 2022.
Bank of America Merrill Lynch is also expected to price a $334.8 million taxable deal for Honolulu Thursday.
The benchmark 10-year muni yield closed Wednesday's session at 1.72%, according to Municipal Market Data. The two-year remained at 0.30% for the 21st consecutive trading session. The 30-year yield slipped one basis point to 2.83%.
"People are following Treasuries," the trader said. "That's probably the major thing. There's nothing specific to munis that would cause the weakening. Supply isn't terrible right now. Rates have come down quite a bit, and you're now starting to see some adjustments that would be part of a normal mini-cycle here."
Treasuries yields backed up Thursday morning, but recouped somewhat as the day's session crossed into the afternoon. The benchmark 10-year yield has risen four basis points to 1.81%.
The 30-year yield has increased three basis points to 2.96%. The two-year yield has ticked up two basis points to at 0.32%.