NEW YORK — The municipal market is seeing reasonable activity in the secondary preceding Wednesday afternoon’s Federal Open Market Committee policy announcement. Traders are also looking to the morning’s offering of $475 million Massachusetts general obligation bonds in the competitive market, a trader in New York said.
“People want to see where that comes in,” he said.
A moderate number of bid-wanted lists are available on both the shorter and longer ends of the curve, the trader added. “In light of the results of the FOMC meeting coming this afternoon, there’s pretty decent activity.”
Economists anticipate the FOMC meeting will result in the fed funds target rate being unchanged from its current range of zero to 0.25%. The committee may also employ another round of quantitative easing.
Muni yields, as they did Tuesday, continue to firm from the middle of the curve on out, according to the Municipal Market Data scale. The yield curve is steady out to nine years. Beyond that, yields are flat to two basis points lower.
The 10-year muni yield Tuesday ticked down one basis point to 2.12%, or five basis points up from the all-time low recorded early last week. The 30-year yield fell two basis points to 3.65%, and the two-year yield stayed at 0.32% for a fourth straight session.
Treasuries are largely unchanged Wednesday morning. The benchmark 10-year Treasury yield is holding steady at 1.94%.
The two-year yield is holding at 0.17%. The 30-year yield has ticked up one basis point to 3.21%.
The market expects volume to be up substantially this week, roughly twice the typical amount this year. The industry anticipated $8 billion will come to market. That’s up from the average $4.6 billion issued weekly thus far in 2011, and last week’s revised $6.2 billion.
Traders said the recent $2.5 billion California tax-exempt various-purpose general obligation and refunding bonds, sold by a group led by Bank of America Merrill Lynch, did well in both the retail and institutional order periods. The pricing spoke well for the state, according to Guy LeBas, an analyst for Janney Capital Markets. The 10-year maturity, in particular, priced at a 109-basis-point spread above the triple-A benchmark scale.
“That spread is significantly tighter than a 2009 issue,” LeBas wrote in a market post, “pointing towards stronger market perceptions of the California name, despite the recent memory of budgetary imbalances and government shutdowns.”
In economic news, the National Association of Realtors reported Wednesday that existing home sales rose 7.7% in August to a seasonally adjusted 5.03 million-unit rate. This follows an unrevised 4.67 million unit rate in July.
Sales overall were up 18.6% on a year-over-year basis from a 4.24 million unit sales pace last August. Economists anticipated 4.74 million in sales, according to those polled by Thomson Reuters.
