NEW YORK — Falling yields and strong activity in the secondary have the municipal market off to a vibrant start of the week heading into Tuesday afternoon.
Muni yields are largely following those of Treasuries, which started the morning by falling sharply on worries emerging from Europe concerning the bailout of Greece. And munis, particularly those with maturities of 17 years on out, are benefiting, a trader in Chicago said.
“The Treasury market is excited about what’s going on,” he said. “Munis are going with them right now. It’s like they were a little shy. Now they’re starting to pick up. “Everything in the secondary is trading. If it didn’t trade on Friday, it’s trading today.
Tax-exempt yields are falling across all but the front end of the curve, according to the MMD scale. For maturities in 2017 through 2020, yields are two to six basis points lower. Yields with maturities beyond 2020 are five to eight basis points lower.
The benchmark 10-year yield on Friday fell seven basis points to 2.17% to end the day.
The 30-year yield plummeted 10 basis points on the day to 3.78%. The two-year yield remained unchanged at 0.30% for an 18th consecutive session, continuing to hover at its lowest level in more than 40 years.
Treasury yields headed into the afternoon with a rally at their back. Yields beyond the front end of the curve continue to move lower, flattening out the curve.
The 10-year benchmark yield has dropped two basis points to record territory at 1.99%. Earlier in the morning it touched 1.908%, reaching levels it hasn’t seen in more than 50 years.
The 30-year yield has dropped six basis points on the morning to 3.26%. The two-year yield, though, remains unchanged at 0.21%.
Even though the week is shortened by the holiday, new-issuance volume is expected to rise. Industry estimates place the total for the week at almost $3 billion, versus a trifling $1.72 billion that came to market last week. Most of the biggest deals are expected to reach the market later in the week.
The equities markets, after coming out of the gate into a downswing, have begun to fight back. Nevertheless, the major indexes are all down at this point by at least 1.33%. The Dow Jones Industrial Average has so far fallen 178 points from Friday’s close.
