Trading in the municipal market crept into the week Monday as a dearth in bonds kept activity light. The amount of Puerto Rico trading slid.
Muni trading volume was 25% below the average volume by midday Monday, according to Bloomberg data, as issuers failed to offer the market any large new deals.
"February has been a grueling month, with extremely low primary market issuance and uncertain economic trends hampering trading now and price volatility," Municipal Market Advisors said in a report Monday. "Not only does this deprive the market of new product and related P&L, but also of price discovery and dealer investment in market making to facilitate secondary trading."
Trading on tax-backed bonds was up 32% from the daily average, more than any other type of municipal bond. Puerto Rico bonds, which traded as a top five most active bond last week, was the eighth-most traded region in the market.
"Keep in mind that, should liquidity and prices in PR names continue to improve, we expect more bondholders will choose to exit PR positions, limiting the potential for near?term outperformance in PR," MMA wrote.
As of midday Monday, no new issues more than $100 million were offered to the municipal market. The week's biggest deal, $270 million of Barclays Capital-led tax allocation refunding bonds for the Inland Valley, California Development Agency, was not yet visible. The bonds were scheduled for Monday, according to Thomson Reuters.
Yields on bonds were steady Monday morning, according to Municipal Market Data.
Treasury yields were mostly unchanged Monday morning, with the 30-year benchmark Treasury yield at 3.70%, and the two-year yield at 0.33%. The 10-year yield bounced one basis point to 2.75%.
