Municipal bond yields climbed on the long end of the curve Wednesday, playing catch-up to Treasury losses that occurred Wednesday after testimony by Federal Reserve Chair Janet Yellen.
"We're definitely weaker again here today, up a few basis points on the long end already," one trader in New York said in an interview. "We were softer yesterday afternoon, and while the longer end definitely was cheaper, they probably should be a lot cheaper."
Treasury yields jumped Tuesday as Yellen made her first speaking appearance since ascending to the chair following Ben Bernanke's exit, but municipal bond yields finished the day up by just one basis point in some parts of the curve.
The chair's testimony before the House Financial Services Committee indicated she expects "continuity" in the Federal Open Market Committee's policy, surprising some on Wall Street who perceived Yellen to be more dovish than Bernanke.
"With the Treasury market selling off, we're trying to follow suit with that today," the trader said. "If all the factors impacting munis were in line we'd be selling a lot more right now, but with very limited supply there's not much to go on."
Just $2.56 billion of new deals are expected this week, with the week's biggest bond issue, $496.4 million Louisiana general obligation bonds, already sold. Some deals originally scheduled for Friday have been pushed up to come to market before a forecasted snowstorm hits the northeast.
"Deals are getting pushed up because of the storm, you'd be crazy to try and come on Friday this week," the trader said.
The biggest deal in the negotiated market set to price today is $97.73 million of Goldman, Sachs & Co.-led revenue refunding bonds for the Metropolitan Water District of Southern California. Barclays Capital will also bring $81.64 million of tax-exempt University of Michigan general revenue bonds.
Yields according to Municipal Market Data's AAA scale were as much as one basis point higher on the long end of the curve Wednesday morning.
Treasuries yields continued climbing, with the 30-year moving three basis points higher to 3.71% and the 10-year jumping five basis points to 2.76%. The two-year yield rose one basis point to 0.35%.
